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November 5th 2018

Budget 2018: R&D Tax Relief for SME's

The amount that a loss-making company can receive in R&D tax credits will be capped at three times its total PAYE and NIC liability for the year. This change is expected to come into effect from April 2020.

HMRC claims to have identified and prevented £300m of fraud "linked to this relief" and the announcement therefore represents an attempt to curb perceived abuses of the R&D tax credits system. It is claimed that 95% of companies currently claiming the payable tax credit will be unaffected by the new cap.

Small companies which have a low PAYE and NIC liability relative to R&D spend are most likely to be affected by the measure; those affected should still be able to claim payable credit up to the cap, with any unused losses carried forward for offset against future profits.

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