Budget Day!

Chancellor of the Exchequer, Rishi Sunak, announced the Autumn Budget 2021 and Spending Review today.

What goodies does it hold for innovative businesses? This truly was a budget for innovation, so there are lots of positives and a few small negatives for companies carrying out R&D.

Below are the need to know changes from the Budget that will impact innovative businesses:

Budget Day 03 March
  • Confirmation that data and hosting costs will be an allowable expense for R&D Tax Relief. If you have already been claiming all your hosting costs, then read our article here.
    • Following two consultations on this topic, it is great to see that the Government has taken on the feedback from industry, including from MMP, and is moving with the times. Although details are still light on the ground, HMRC should be releasing the guidance on this change any day now. When they do, we will have a full overview of this. Sign up for our newsletter for updates on this topic.
  • Only domestic activities will be allowed in the R&D Tax Relief scheme from April 2023. Update: now revised to April 2024.
  • The Government also announced plans to tackle abuse of and improve compliance with the R&D tax reliefs - further information regarding this will be released later in the Autumn. Read our article on the state of the R&D claims industry.
  • Doubling creative sector tax reliefs for museums, galleries and theatres. Unfortunately, the government hasn't done the same for the video game tax relief.
  • Funding for Innovate, the UK grants for innovation body, will increase to around £1bn per year by 2024-25.
  • National Insurance contributions for employees and employers will both rise. This will be a double whammy for business since most companies will need to raise salaries to keep employees from having a dip in their take home earnings.
  • Minimum wage rates will increase to £9.18 from April 2022.
  • Dividend tax rates are rising too. So for business owners or investors receiving dividends, they'll be taking home less cash. The rates will increase by 1.25% from April 2022 across the board.

As per usual, a number of things were announced with limited details of how they will be rolled out. The following funds and programmes all have the potential to improve the resources and funding for innovative businesses:

  • £5bn for health-related research and development - this is one of the most eye-catching announcements but most of this cash was already pledged. There is however £40m new investment in social care research, £95m for the Prime Minister's healthcare missions and £33m for covid research.
  • Scale-up visas - fast growing companies (those with 20% increase in turnover of staffing for the past 3 years) will now have an accelerated route to hire foreign talent into the UK. It will launch in March 2022.
  • £3bn to drive a skills revolution. Part of the goal of this fund is to create opportunities for people wishing to enter high value sectors such as AI, cybersecurity and nuclear. The fund will increase the number of places on skills bootcamps, fund additional classroom hours and create 24,000 traineeships. Hopefully this will result in a wider and more highly skilled talent pool to recruit from.
  • £1.4bn Global Britain Investment Fund to funnel money into key innovative sectors such as electric car manufacturing, offshore wind and life sciences and a new talent network to woo foreign talent into UK industries. This should hopefully make it easier to recruit overseas talent for high-skilled jobs.
  • The government is also planning to increase R&D investment outside of the greater South-East. Plans for this will be announced in the forthcoming Levelling Up White Paper.
  • Online sales tax consultation - the Treasury announced a consultation on this
  • More ways to raise investment/funding: including the Regional Angels Programme, expansion of the Regional Investment Funds and removing the Pension Charge Cap so pension funds will be able to deploy capital into VCs

If you have any questions on how the above will impact your business or your current and planned claims, please get in touch or to speak to one of our team

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Written by David Marshall & Alexis Marz

David and Alexis are the founding Directors of MMP Tax.

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