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MIA  MOTORSPORT INDUSTRY ASSOCIATION

Budget immediately improves R&D Tax Credit – can you benefit?

28 Mar 2014

For the purpose of R&D tax credits, a SME is defined as having 500 or fewer employees and an annual turnover €100m, or a balance sheet that does not exceed  €86m so this news will immediately apply to most UK motorsport companies and encourage continuing investment in R&D.

The Chancellor announced that from April 2014, the Government will increase the rate of the payable credit to loss makers under the SME R&D tax credit scheme from 11 per cent to 14.5%.

SME R&D tax relief works by super-deduction, allowing companies to reduce profits liable to corporation tax by 225% of qualifying R&D costs. SMEs which are loss-making, have the option to convert any taxable losses, which are attributable to R&D relief, into a payable cash credit.

This means loss-making SMEs are able to reclaim 14.5% multiplied by 225%, or 32.63%, of their R&D expenditure in the form of a cash credit.

For example, a loss making SME investing £100,000 in qualifying R&D will be able to claim a cash payment of £32,600; which is £7,800 more than under the existing scheme.

The rate increase will apply for qualifying expenditure incurred on or after 1 April 2014.

Contact your tax adviser now, or ask Katrina Briggs at the MIA for further details. UK wide R&D workshops soon to be published.

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