From a pharmacy business perspective, the COVID-19 pandemic has been extremely challenging. A problem much exacerbated by the pandemic is cash flow.
Pharmacies have faced huge increases in demand while it has been difficult to maintain staffing levels, in addition to disruption to supply chains and additional costs.
All this has placed extra stress on the flow of funds into these businesses, the vast majority of which are SMEs.
Tax-wise, there are two main things pharmacies can do to get back on a strong financial footing.
Many pharmacies own their premises and this brings a very valuable tax incentive into play, known as Capital Allowances. These provide a sizeable reduction in the effective rate of corporation tax by offsetting the cost of physical assets contained in commercial premises.
The other – R&D tax credits – won’t apply as often but they’re not just for large pharmaceutical firms developing drugs. In fact, R&D can apply if a pharmacy invests in the development of a new piece of software that is unique or develops new technological processes to improve the running of the business. R&D tax credits provide a reduction in Corporation Tax bills or a cash lump sum worth between 24.7% and 33.4% of qualifying expenditure for SMEs.
Finding out if a business has qualifying expenditure costs nothing. For companies with a December year end, the faster they act the better. There’s a deadline of two years from the end of the tax year in which R&D took place in which to claim.
The average claim across UK firms, large and small, was £89,000 last year. Neither scheme should be overlooked.
Nigel Holmes is Head of R&D Technical Operations at Catax and sits on the HMRC R&D Consultative Committee. He can be reached at [email protected]