Key tax updates post-Budget - Research and Development

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Posted on December 12, 2017

In addition to a commitment of additional funds to ease the administrative burden of claiming R&D tax relief and making it more accessible to businesses, the Government announced a change that will impact large businesses, and those SMEs which receive grant funding; as from 1 January 2018, the rate of Research and Development expenditure credit will increase from its existing rate of 11% to 12%.

Surprisingly though, given the Government's comments about SMEs being the engine room of the UK economy, there were no changes announced around the R&D tax relief for SME businesses. This does continue to be a very valuable form of tax relief, even though that value will be somewhat reduced with the rate of corporation tax reductions that are taking place over the next couple of years.

There also continues to be a misconception in the SME market around the businesses that are able to make a claim for R&D tax relief. According to a HMRC report, more than 30% of all R&D claims come from businesses operating outside of what are construed as the ‘usual’ R&D-eligible sectors, with industries as diverse as retail, construction, packaging and software all taking advantage of the tax relief. In fact, the definition of Research & Development is so wide and the activities that can be considered under the scheme so varied, it is very difficult to spot an opportunity and determine eligibility to make an R&D claim purely based on a business’ sector.  Our team of R&D experts has supported many businesses in making successful claims and if you would like more information, please get in touch.

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