Budget 2021: Setting the scene for a sustainable recovery, and the role of innovation

The 2021 Budget prompted a mixed response as usual but putting restart and recovery at its core gave it a better chance of more businesses backing it.

Extension of the furlough scheme to the end of September 2021 was welcome news to companies expecting to bounce back. While employer contributions to salary will become mandatory from July, it still goes a long way to supporting businesses navigating their recovery.

The hospitality sector was given breathing space, with the 5% temporary VAT reduction being extended to 30th September. And shops and other businesses forced to close will benefit from £5bn in restart grants.

Good news for business supporting the sustainability agenda

A focus on helping businesses flourish via better access to skills, capital and ideas left many hopeful of an economic rebound sooner. Plans to drive jobs, growth and investment through the extension of initiatives such as self-employed support, business grants, loans and VAT cuts indicate serious intention. Plus, a pledge to put green investment at the heart of the UK’s economic recovery is not only good news for the planet but businesses supporting the sustainability agenda too.

Many believe we have a ‘once-in-a-lifetime opportunity’ for a sustainable recovery. And from what we know so far, the Government’s economic stimulus and recovery plans do have the potential to restart the economy and drive action on sustainability goals. The ten-point plan to ‘build back better’ and kickstart a green industrial revolution outlined late last year will see the Government invest £12 billion to achieve net-zero sooner.

With a recognition that green technologies rely on innovation, the Government is making significant sums of money available to fast-track the commercialisation of low-carbon technologies, systems, and business models. Their commitment to increasing investment in research and development (R&D) to 2.4% of GDP by 2027 is a positive start. And the £1 billion Net Zero Innovation Portfolio is the next step to putting green innovation on the agenda for more organisations and welcome support for those already working towards a sustainable business model.

Beyond business, the ‘world-first’ green savings bond through NS&I allows almost everyone to play their part in protecting the planet in a new way. The account is modelled on a standard savings account; however the money you and I deposit will be used by the Government to finance green infrastructure projects. It’s completely risk-free, so you’re guaranteed your savings back at the end of the savings period plus interest.

Change is on the horizon for R&D tax credits

Back to businesses, and while R&D is a crucial contributor to the Government’s net-zero aims, some changes are on the horizon for organisations considering R&D tax credits. Perhaps the most notable for now is the amount of SME-payable R&D tax credit in any one year being capped at £20,000 plus three times the company’s total PAYE and NIC liability - designed to deter abuse.

With regards to future changes, the Government will carry out a review of R&D tax reliefs. This review will consider all elements of the two R&D tax relief schemes, with the objective of ensuring the UK remains a competitive location for cutting-edge research, the reliefs continue to be fit for purpose, and taxpayer money is effectively targeted. The Government is also publishing the summary of responses of the recent consultation on the scope of qualifying expenditures for R&D tax credits across the UK.

Have your say…

They will also consider bringing data and cloud computing costs into the scope of relief alongside a number of other policy options and priorities at the wider review. The Government has opened the consultation to 2nd June, where all interested parties and stakeholders can submit their thoughts on the scheme to assist with the review. You can find out more at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/965501/Condoc_-_RD_review_.pdf

We will keep you up-to-date with changes as they happen here on the blog. However, if you have questions about a claim or planned future submissions, and the changes to the scheme, please contact the team on 01233 653008 or at info@riftresearch.com.