Research & Development (R&D) credits give tax relief to loss-making small and medium enterprises (SMEs) with no corporation tax liability by offering a cash credit on their expenditure on qualifying R&D activities.
The rate at which the credit is offered has been increased in this year’s Budget from 11% to 14.5%. This will mean a cash payment from HMRC to over £32 for every £100 spent on qualifying R&D which will be a welcome boost to innovative start-up companies. Many start up SMEs will be loss making at the outset and the R&D cash credit can allow them to continue to invest in innovation. The Government estimates that £130m of extra funding per annum will be provided by 2018/19. We also anticipate an increase in the 800 science and technology companies that currently benefit from this credit.
The increase in the rate will apply to expenditure incurred on or after 1 April 2014.
This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.