R and D Tax Credits – Good News In UK Budget Statement 2012

Date: 3rd April 2012

R and D Tax Credits – Restrictions Removed

Research and Development Tax Specialists will be gearing up to help more UK companies claim their R and D Tax Credits as a number of restrictions were lifted from 1st April 2012.

In the 2012 Annual Budget Statement the British Chancellor announced some welcome changes to the scope of R and D Tax Credit claims.

The proposals included removing the rule that limits a company’s payable R and D tax credits to the amount of its PAYE and NIC bill for the relevant period. This means that smaller and start-up companies who have invested their own unpaid time on their R&D projects and relied on outsourced specialists to do their R&D will now be able to claim R and D tax credits.

It was also proposed that the rule that limits claims to a minimum of £10,000 will also be lifted so that smaller R&D projects become eligible to claim. So research and development tax specialists will need to gear up to make their services relevant and affordable for smaller clients.

The third piece of good news was a proposal to increase the additional deduction for R&D expenditure by Small and Medium Enterprises (SMEs) by a further 25% giving a total deduction of 225% of actual expenditure. This will lift the value of claims boosting the level of R and D tax credits that can be claimed.

The UK Chancellor also announce that there will be an ‘above the line’ R and D tax credit to encourage R&D activity, with a minimum rate of 9.1% before tax. This will be consulted on with a view to including it in the Finance Bill 2013.

While this is good news research and development tax specialists, such as ourselves, are aware that there is still a great deal of misunderstanding about what projects are eligible to make a claim for R ad D tax credits, which results in significant under claiming of R and D tax credits by eligible companies.

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