UK to extend R&D tax credits

UK Tax Credits to encourage small businesses to invest more in research and development will increase by GBP 80 million a year from 1 August, bringing the total tax relief available to around GBP300 million a year, the Exchequer Secretary to the Treasury, Angela Eagle MP announced.

To enable companies to claim the additional tax relief, the rate available for qualifying small and medium-sized enterprises (SMEs) investing in R&D will increase from 150 per cent to 175 per cent of their investment.

The size of company that can qualify for tax relief will also increase, from 250 employees to up to 500 employees, with the associated limits on balance sheet value and turnover also doubling.

Eagle said the R&D tax credit schemes are the UK government’s most important policy in support of R&D investment by companies in the UK. “By increasing the value of the SME scheme by a third, we are showing our continued commitment to helping innovative UK companies invest to grow.”

The UK introduced R&D tax credits in 2000 for SMEs and in 2002 extended the scheme to large companies. This is viewed as a key part of raising R&D spending to 2.5 per cent of GDP by 2014.

The enhancements are accompanied by small revisions to the rules of the scheme to ensure it complies with the framework for State Aids for R&D within Europe, which limit the amount of aid that can be claimed per R&D project to Euro 7.5 million, prevent companies in difficulties from claiming relief, and extend the relief to cover the cost of clinical trial volunteers and of compulsory social security contributions.