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.