Autumn budget for 2018

With Brexit around the corner there had been high expectations from UK business for the government to explore new ways for our country to look attractive and appealing post EU. Unfortunately, this did not quite happen. However, in-light of a recent significant fraud case identified by the HMRC, the government has re-introduced a NIC and PAYE cap for SMEs claiming a payable credit.

A new PAYE and NIC cap for the SME payable credit

Originally withdrawn in 2012, the government has now declared to re-establish the PAYE and NIC cap on SME payable credit, to advert abuse of the SME payable R&D tax credit. The duration of accounting commencing on or after 1 April 2020, will stand at 300% of the company’s total PAYE and NIC for that period. With this PAYE and NIC cap being reintroduced, this incentive will possibly be more likely to achieve its goals: If SMEs invest in appointing their own employees and produce STEM jobs. The benefit they receive will not be affected by the cap. Hopefully, this will stop the amount of exploitation and motivate the correct practice between businesses.

Research and development in business

Research and Development (R&D) Tax Credits are a tax incentive designed to encourage UK companies to invest in innovation. For small and medium enterprises (SMEs), R&D is a Corporation Tax (CT) tax relief that can reduce a company’s tax bill if liable for CT or can result in a payable tax credit.

For large companies, the name of the incentive is Research and Development Expenditure Credit (RDEC), which is an above the line credit and can allow them to claim payable cash credits or reduce their tax bill.

Research and Development for Tax Purposes

The definition of R&D for tax purposes is much more extensive than you might consider. The R&D tax relief schemes are designed to be suitable across any sector and exceptionally inclusive.  It’s highly feasible that any challenges you face within your business projects could qualify as an eligible expenditure.

Government’s terms on R&D

As stated by the government on their R&D relief support companies that work on innovative projects in science and technology. It can be claimed by a range of companies that seek to research or develop an advance in their field. It can even be claimed on unsuccessful projects. They also state that businesses may be able to claim Corporation Tax relief if your project meets their definition of R&D.

Requirements for R&D Tax Credit

The work that qualifies for R&D tax credit relief is required to be part of an existing project or a specified project you intend to pursue in order to make progress in science or technology. This does not include an advance within social science such as economics and pure maths.

To get the R&D relief you need to justify how a project:

  • looked for an advance in science and technology
  • Attempted to overcome uncertainty
  • had to overcome the risks within the project
  • couldn’t be easily worked out by a professional in the field

Your project may research or develop a new product, service, process or to improve on an existing one.

Innovation success story

Information sourced from Oxford University, an innovative company called Brainomix have developed software which helps doctors to evaluate the severity of strokes and quickly identify appropriate treatments. With the support and funding from the Innovative UK, the software analyses brain CT scans of stroke patients to determine whether they are likely to benefit from either clot-busting (thrombolytic) treatment or mechanical clot removal. This advanced technology allows hospitals to evaluate within minutes lifesaving treatment for their stroke patients.

Dr. Michalis Papadakis, CEO, and co-founder of Brainomix, explains: “In the hours after a stroke, it’s really difficult to tell how much damage has occurred on the brain CT scan.  The signs are very subtle but are an important factor when selecting patients for life-saving treatment”

Clinical trials have shown that e-ASPECTS software is at least as good as expert physicians at evaluating CT scans of stroke patients. Thus, saving the life and quality of lives of stroke patients, time and money.

Is your business eligible for R&D Tax relief?

The guidelines and regulations controlling this niche area of tax credits are complex. So, before we get too involved in claim preparation it’s important to take a bit of time to understand the business, both technically and financially.

The 2018 IPCC report

The United Nations Intergovernmental Panel on Climate Change (IPCC) have recently released a report in relation to the broad explanation of the science of climate change and the future of Earth. Collaborated by 133 contributing authors, 91 lead authors, from 40 countries have assessed 30,000 scientific papers, and their discoveries should not be ignored. This warning has been prepared and delivered by leading worldwide researchers to governments and policy-makers.

The report has revealed that the world is headed for a dangerous temperature rise of 1.5°C by 2030 if substantial action isn’t taken, with immediate effect. This is far earlier than previously thought. Since the middle of the 19th century, our planet, has already warmed by 1.C and potentially could reach 1.5.C before the middle of this century at the current rate.

Global warming today

With proven evidence of human’s contributions to the rise in greenhouse gases, globally we must act now. Clearly directed within the report, we must reduce emissions of greenhouse gases to net zero by 2050 to have a realistic chance of limiting global warming to 1.5°C.

As the world’s temperature has risen, the warming has triggered many other changes to the Earth’s climate. With extreme weather and climate events that have increased in recent decades, such as heat waves and droughts, are the primary way that most people experience climate change.

Innovative ways beginning to reduce carbon

Today, there are millions of cars on our roads and each one of them is a potential contributor to environmental pollution. Cars emit poisonous gases which impact the environment, and accounts for roughly a quarter of the UK’s greenhouse gas emissions and seriously affects air quality in major cities. Innovators and companies have been investigating over the last decade to reduce our carbon footprint within transport. With the introduction of electric and hybrid cars to tackle pollution problems, governments around the world are implementing ambitious policies to promote the electrification of transport and phase out ICE (internal combustion engine) vehicles. The UK and France both plan to ban the sale of petrol and diesel only cars by 2040.

Innovation potential

The recent “Decarbonathon” competition, run by the World Economic Forum Young Global Leaders initiative, alongside ENGIE and the National Physical Laboratory, set out to find the most promising new ideas that could reduce carbon emissions in cities, and selected the five technologies that it thinks holds the most promise. One concept that has been considered to hold the most potential is the Motum project. This idea aims to reduce industrial and residential emissions by introducing a borrowing/lending basis of electrical appliances. For example: a simple electrical drill is typically only used for at least twelve minutes during its lifetime. An idea borne out of a sharing economy, this concept aims to reduce overconsumption by making it simpler to share appliances with others. Thus, reducing emissions from industrial manufacturing with supply and demand.

Peatland restoration

Peatland ecosystems are the most efficient carbon sinks in the world, these areas store carbon and carbon-containing substances for long periods of time. Peatlands and their surrounding plant life work to contain the carbon released by the decomposing peat. This ecosystem covers approximately 3% of the world’s land area yet holds an estimated 30% of the world’s carbon content.

It is estimated there are 1.7 million hectares of peatland in Scotland, much of which is eroding.  Erosion is caused by the peat either being washed away by rainfall or dried out by sunlight. Recently the Scottish government have launched an £8m fund to restore these peatlands. This restoration work will help reduce the country’s greenhouse gas emissions by locking carbon into the environment. Experts in this field plan to flatten the peat embankments using diggers and cover with vegetation. This significant increase in peatland restoration forms part of Scotland’s draft Climate Plan, which is currently going through parliament.

Andrew McBride, a peatland specialist with Scottish Natural Heritage, has confirmed: “Scotland’s peatlands actually hold the equivalent of about 140 years of our emissions from Scotland – all the industry. So, it’s very important that we hold the actual carbon and the peat in place.

UK Aviation pledge

Launched early this month, Heathrow Airport’s new plan to set out four key areas to reduce its direct and indirect emissions, before negating the remainder accounted for by its future expansion.

This strategy, delivered in February 2017, includes aims to ensure accounted growth, together with the construction of the third runway as carbon-neutral. To address carbon emissions from the runway, Heathrow are looking to use both cleaner aircraft technologies and alternative fuels. It is the ambition for Heathrow to become “a leading hub for the development and deployment of sustainable aviation fuels” according to The Guardia

The strategy outlined for the EU is a target goal to achieve ‘net zero’ emissions by 2050. Under these plans, any carbon emissions in the EU will be counterbalanced by the actions else

Heathrow 2.0 sustainability strategy.