• An assessment on their view of the effectiveness of R&D tax reliefs for SMEs and the intention for further reform.
• A statement on error and fraud in the SME R&D tax reliefs, including details of what actions they have taken in response including the number of investigations, prosecutions and how much reclaimed, 

• RDEC increases to a taxable credit of 20% from 13%. 
  • So for £10,000 of qualifying expenditure the net credit increases from £1,053 to £1,500.
• SME R&D tax relief additional deduction in calculating profits of trade reduced from 130% to 86%. 
  • For every £10,000 of qualifying expenditure, the tax saving reduces from £2,470 to between £1,634 (19% tax payer) to £2,150 (25% tax payer).
• SME surrenderable loss – surrender at 10% instead of 14.5%. 
  • This reduces the maximum amount of cash refund by almost half from £3,335 for every £10,000 of qualifying expenditure to £1,860.

So, it seems that the lower rates of SME tax relief are here to stay. However, the Government has at least acknowledged the concerns of the genuine R&D companies, for whom the R&D tax relief is intended to support and incentivise. Another case of watch this space for further updates.

James Cowper Kreston’s Business Tax team work with many science and technology companies, assisting them with their R&D tax relief claims and we are constantly monitoring the progress of all the proposed changes.  It is important that companies  who claim R&D tax relief consider the impact of these changes on their future plans and what they can do to mitigate them.