By now almost everyone in the UK will have heard of ‘Eat Out to Help Out’, it’s the government’s new financial incentive scheme to encourage people back into restaurants and cafes after the COVID-19 lockdown. Less well known but just as valuable is another government scheme, R&D tax credits. This gives all companies in the UK who are required to pay corporation tax the chance to get almost 25% in corporation tax relief when they make qualifying business improvement investments. Alternatively, they could receive nearly 20p cash back for every £1 they invest in a qualifying activity.
As a scheme, R&D tax credits are well worth investigating if your warehouse is looking at introducing new technology or working processes. Many businesses have already benefited from this source of government-backed cash, which could assist in helping make workplaces COVID-19 secure and adapt to longer order processing times, cash flow challenges and Brexit. On average, tax savings of approximately £53,714 per claim can be realised for the average SME and for larger companies it is much more (based on 2017/18 figures from HMRC). Over multiple years, this can run into hundreds of thousands of pounds. UKWA the United Kingdom Warehousing Association recently highlighted the use of R&D tax credits as an opportunity for warehouse managers to secure the funding needed to thrive in 2020.
Unfortunately, due to the reference to R&D in the scheme name, many companies don’t realise they could be eligible to claim for this very useful source of tax relief (and cash). They think it is just for scientists in white coats, but in order to be potentially eligible companies just need to be registered in the UK, required to pay corporation tax and have conducted qualifying business improvement activities.
Now is a particularly good time to be exploring whether R&D tax credits could be claimed, as many warehouses are adapting their processes to reflect increasing e-commerce business models. For instance, you may be considering implementing warehouse management system (WMS) software to replace paper-based working. This could qualify as innovation for R&D tax relief purposes. Other developments related to introducing new business processes for example, to support social distancing or different business models that create a competitive advantage [could] also qualify.
Additionally, if you have already implemented new technology which is deemed qualifying, it may also be possible to make a retrospective claim for any accounting period which ended within the last two years.
Where a qualifying software implementation has taken place (or is planned), it may also be possible to reclaim resource costs – staff costs with NICs and pension contributions, costs for energy and consumables used, plus a proportion of the costs incurred for contractors.
A best of breed warehousing automation solution, such as Indigo WMS, is an ideal candidate for technology funding and could help put your business on the road to COVID-19 recovery, without having to repay a loan.
Author: Eric Carter, Solutions Architect, Indigo Software