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COVID-19: Companies’ responses to the pandemic and R&D tax relief

Emma Clewes, Director, Corporate Tax
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The COVID-19 crisis is providing an opportunity for many UK businesses to innovate and adapt. Human curiosity drives innovators to find ways to solve problems and success reinforces this curiosity and continues to drive innovation and competition in business.

From 3D printed face shields and hands-free door openers to emergency ventilators, the COVID-19 pandemic has ignited curiosity and catalysed critical innovation.

Where companies adapt and innovate they may qualify for valuable R&D tax relief.

How can you qualify for R&D tax relief?

The company’s activities must qualify for relief. Qualifying R&D activities are those which seek to achieve an advance in knowledge or capabilities in the field of science or technology, and in seeking that advance there are technological uncertainties and challenges to be overcome.

Qualifying R&D activities can include the creation and adaptation of processes and products. Therefore, companies adapting processes and developing products in response to the COVID -19 pandemic may qualify for R&D tax relief. New products have emerged since the onset of the pandemic, such as antiviral snoods and face coverings, and time should be taken to review the activities of innovative companies to determine whether they qualify for relief and to identify the scientific or technological advances that they have sought.

As companies change working practices and business plans in response to the COVID-19 pandemic, a process, product or service is not an advance in science or technology simply because science or technology is used in its creation. For example, this may be the case for companies who are adapting to use already known video conferencing software or to 3D print standard product face shields using known technology and design techniques. However, companies should not dismiss their ingenuity and should explore their activities carefully to maximise the relief available.

What are the benefits of R&D tax relief?

The benefit for SME’s is 43.7% of qualifying spend on R&D activity for profitable SMEs and 33.35% for loss making SMEs. RDEC benefit is currently 10.53%.

The key to maximising R&D relief is to understand the activities of the company fully to identify the projects and activities that may qualify. World War Two is remembered for a tide of ingenuity including the widespread development of computers and radar, and the 2009 recession saw the evolution of taxi services and accommodation through Uber and Airbnb. 2020 will very likely be remembered as a time of scientific and technological advances in virus-busting solutions, connectivity, PPE and medical devices.

If your company is developing products and processes in response to the COVID-19 pandemic, we can help you review your activities to make sure you are not missing out on valuable R&D Tax relief.

Contact Crowe's Innovation Taxes Team for clear pragmatic advice about R&D tax benefits and what impact these could have on your company or visit our dedicated R&D page.

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Stuart Weekes
Stuart Weekes
Partner, Corporate Tax
Thames Valley