PAYE/NIC cap being introduced on the 1 April 2021

March 12, 2021

The Government remains committed to supporting R&D and has an ambitious target to raise the total investment in research and development to 2.4% of UK GDP by 2027.

From the 1 April 2021, a PAYE/NIC cap is being introduced.  The reason for this is to avoid misuse of R&D tax relief incentives. What this means for SME businesses, is that they can only claim a payable tax credit of up to 300% of their combined PAYE and NIC liabilities,plus a £20,000 buffer.  Or put another way, this limits the amount that can be claimed to the level of the new cap, which is defined as£20,000 plus three times the company’s relevant expenditure on workers.

These new, tighter rules will enhance protection for genuine businesses carrying out R&D activities.  They will help to determine whether a company’s employees have been genuinely developing new products, processes, or services, or enhancing existing ones, or trying to solve a problem where no solution is evident and are also designed to ensure that the use of subcontractors is related to R&D. 

Now more than ever, it is important for companies to be able to produce the evidence to support their claims, ensuring robust internal documentation and correspondence. Record keeping is important as it often serves to maximise a claim’s value.  If you do not have specific records for your R&D Tax Credit/Refund claim, all is not lost, Innovation in Life can help you with this. You are bound to have the information; you just do not realise or have the time to look for it. We will take care of every single part of your claim from the moment you engage with us.

If you have any questions on any of the new legislation or if you are not sure if you have been carrying out R&D qualifying activity, contact us for a no obligation 15-minute telephone conversation on 020 7052 8323.  We would love to hear from you.

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