How will the R&D tax changes announced in the 2018 budget affect your company

The Budget yesterday announced anti-avoidance measures for the R&D SME tax relief scheme.

To deter abuse from fraudulent companies who to do not employ many people or pay PAYE and NICs, a cap has been introduced for repayable R&D Tax credits, for loss-making companies.  From April 2020 the amount a loss-making company can receive in R&D Tax credits will be capped at three times the company’s total PAYE and NIC liability.

This change will ensure that the relief will only go to companies who have a real presence in the UK, rather than to those who have little or no employment or activity in the UK.  HMRC estimates that approximately 95% of the companies currently claiming will be unaffected.  However for certain start-ups who have a low headcount, yet genuinely undertake R&D activities in conjunction with 3rd parties, there will be some disadvantages.  In these circumstances, these companies will still be able to claim the payable credit up to the cap, with any unused losses carried forward to be set against future profits.

The government plans to consult on how the cap will be applied and we will take part in these consultations.

Arrange a free consultation with our team of experienced and approachable tax incentive advisors today. At Kene Partners, our mission is to help innovative companies access millions of pounds of government money set aside to foster innovation. Your business could be next.