The decision to increase tax relief for companies that carry out qualifying research and development (R&D) has been given a cautious welcome.
Chancellor Rishi Sunak announced he was boosting the rate of the R&D expenditure credit from 12 per cent to 13 per cent, in his new Budget.
Owen Kyffin, a director of regional accountancy firm Whitley Stimpson which has offices in Bicester, Banbury, Witney and High Wycombe, says: “I know from some of my clients in manufacturing, when businesses start up and are very cash-hungry, the availability of R&D reliefs is absolutely key to their cashflow.
“Very often, if you’re putting in a lot of plant machinery and kit during the early years, you’re spending out a lot in the hope of a future innovative product. If that’s pushing you over into losses, and you can surrender those back for 13 per cent repayable tax credit from HMRC, that’s very valuable in terms of cashflow in those early years.”
But Kyffin points out much of the Chancellor’s R&D-related efforts and grants were skewed towards the North and the Midlands, as part of the government’s so-called ‘levelling up’ policy.
Fellow Whitley Stimpson director Ian Parker, says: “There is £400m going to universities and the Chancellor very much stressed it was ‘around the country’, which, for our area might not be great news, because a lot of the industrial spinouts we see come out of Oxford University.”
Support for businesses to deal with the temporary economic impacts of the coronavirus outbreak was a central feature of the new Budget.
With the government estimating up to 20 per cent of the UK’s workforce is expected to be unable to work at any one time, small and medium-sized companies could be particularly hard-hit.
To address this, the Chancellor announced employers with fewer than 250 staff will be able to reclaim Statutory Sick Pay for employees unable to work because of coronavirus. This refund will be for up to two weeks per employee.
Ian Parker comments: “The proof of how useful this will be, is the speed with which the government and HMRC responds.
“Clearly, businesses will still have to pay out that statutory sick pay to employees in the first instance and it’s only really of benefit if they get that refunded fairly quickly to help their cashflow.”
He adds: “If there are delays on refunds being processed, which we’ve seen in other departments over the past year, it almost loses the benefit to SMEs.”
Another temporary measure introduced in the Budget will allow employees to obtain a ‘sick note’ by calling NHS111, rather than visiting their GP.
People who cannot work due to coronavirus and are eligible for Statutory Sick Pay will also now receive it from day one, rather than from the fourth day of their illness.
Kyffin comments: “The government seems to be taking quite a light touch in terms of what proof is going to be needed. They’re obviously trying to stop people having to go to the doctor’s or hospital and saying you’ll be able to get a sick note over the phone.”
However, he and Parker agreed detail around how this will work in practice seems “a bit woolly”.
A newly published statement from the Department for Work & Pensions, reads: ‘If employees need to provide evidence to their employer that they need to stay at home due to coronavirus, they will be able to get it from the NHS 111 Online instead of having to get a Fit Note from their doctor. This is currently under development and will be made available soon.’
Both Kyffin and Parker welcome help for the self-employed and those in the ‘gig economy’.
“I am conscious there are a huge number of self-employed people who wouldn’t be entitled to statutory sick pay,” Parker adds.
Ahmed Goga, director of strategy and programmes for OxLEP, is keen that firms, especially SME’s, know about and can access extra help. He points out: “Small companies, in particular, won’t have large HR and backroom teams with large resources. We need to make sure that firms who have access to help from the Chancellor know about and can get hold of that.
“As soon as there is clarity on how announcements in the Budget will be operationalised, we will be communicating those.
“Some markets are particularly vulnerable, such as tourism and hospitality,” he adds, pointing out these sectors have already suffered as a result of flooding and Brexit.
“There is general anxiety among people and this will have a natural impact on productivity levels. The Chancellor needs to make sure the they are pricing that in.”
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