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Research and Development tax credit: making the most of the increase
The Research and Development (R&D) tax credit for small companies was increased to 200 per cent from 1 April 2011 – but it doesn’t stop there. The rate will rise to 225 per cent from 1 April 2012.
These changes, which were announced by Chancellor George Osborne in his Budget report on 23 March 2011, are designed to improve the overall competitiveness of the UK tax system by increasing the incentive for SMEs to carry out R&D.
Research and development is defined by HMRC as a project seeking to achieve an advance in overall knowledge or capability in the field of science or technology through the resolution of a scientific or technological uncertainty. It cannot just be to simply advance the knowledge or capability of the business.
In addition to this, the rule which limits a company’s R&D tax credit to the amount of PAYE and National Insurance contributions (NICs) it pays has been abolished. This will benefit many start-up businesses which do not currently have enough PAYE and NICs to receive the R&D credit.
At Lamont Pridmore, we can help your business apply for R&D tax credit and make the most of the new rate. For further information, please contact us.
