It would be an understatement to say that COVID-19 has impacted the global economy. Both on a personal and professional level, the global pandemic has changed the way we work and challenged the way we operate.At a time when schools are beginning to reopen and we prepare to embrace ‘the new norm’ more than ever, many business owners are questioning how to claw back their cash flow in a bid to rebuild their profit margin and contribute to kickstarting the national economy.

While short-term solutions such as the government's job retention scheme were made available to help businesses save on their payroll during the peak of the pandemic, longer-term solutions are now required to help companies stabilise their financial futures.

Fortunately, the government’s research and development (widely known as R&D) tax credit scheme could provide business owners from all different sectors with a golden ticket to financial recovery.  

In this blog post, we’ll outline how R&D could influence your business’s recovery - helping you plan towards a more stable future during an unstable moment in time.

What is R&D tax relief?

Research and development (R&D) tax relief is a tax incentive created by the UK government to encourage companies to invest in innovation through R&D. Both SMEs and large corporations can take advantage of this scheme, claiming back a generous corporation tax deduction or cash refund as a result. 

Throughout the coronavirus pandemic, this scheme has continued to run, with the HMRC aiming to get back to people who’ve submitted their claims within 28 days.

How can I utilise R&D tax post-COVID-19?

For the majority of UK companies, these unprecedented times have forced businesses to find new ways of working, keeping cashflow healthy and meeting payroll costs. R&D tax credits can offer a valuable source of government-backed funding that has the potential to make businesses all the more secure in the future by encouraging innovation. 

The money claimed by businesses through R&D tax credits can be used to extend capital runways, pay wages, pay for materials and equipment, buy new software and more - all of which are vital when working through a period of time where restrictions on worker mobility continue.

Businesses should look to utilise these tax allowances to invest in technology as we become more reliant on the digital world post-COVID-19. Purchasing software and hiring staff members ready to innovate through AI technology could be the answer to ensuring growth in the new norm.

What can I claim?

First thing’s first, when it comes to applying for R&D tax credits, you need to be carrying out (or have previously carried out) a qualifying R&D project in the last 2 years. This means leading something innovative that’s considered eligible according to the HMRC’s R&D definition.

For example, loss-making gin distilleries that researched and developed hand sanitiser during the pandemic’s peak could claim back 33.35p for every £1 spent - helping them invest costs in new R&D areas for the future.

As with any problem, adapting the way your business operates in line with the challenges it faces should be a priority. It’s no good sitting back and waiting for the situation to calm down - instead, you should look to innovate how you operate by utilising R&D tax credits to help you stabilise your financial future.

To find out whether your business is eligible for R&D tax relief, get in touch with LUMO today!