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R&D Tax Credits for SMEs – removal of qualifying condition

The new Coalition Government has announced that it will enact a proposal to extend the scope of the more generous R&D tax credits for SMEs.

The new Coalition Government has announced that it will enact a proposal to extend the scope of the more generous R&D tax credits for SMEs.

The effect of the change is to allow SMEs to benefit from the tax deduction of 175% of their R&D expense in circumstances where the company carrying out the research currently is excluded because it does not own the resulting intellectual property.

As well as giving the enhanced deduction the SME version of the R&D scheme allows companies with insufficient taxable profits to cash in the R&D relief for tax repayments up to the amount of their PAYE remittances.

Any company must meet all the remaining qualifying conditions for the SME R&D relief and it is advisable to take professional advice. If a claim has failed solely because of failure to meet this condition it is particularly vital to take advice as soon as possible, as this change is likely to be introduced with retrospective application to the end of 2009.

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