[UK] Government proposes R&D tax credit revamp for SMEs

[UK] Government proposes R&D tax credit revamp for SMEs
18 Jan 2023

A UK government consultation document has acknowledged there is “merit to the case for further support” to small and medium-sized businesses, SmallBusiness.co.uk reports.

In the document, published on January 13, the Government proposed bringing in R&D tax benefits for small businesses after plans to cut an existing incentive.  

Chancellor Jeremy Hunt cut R&D rebalanced investment incentives towards larger companies in November’s autumn statement. The move reportedly caused a backlash from trade bodies. 

The Research and Development Expenditure Credit (RDEC) rate for larger businesses increased by 7 per cent while the small and medium-sized enterprises additional deduction decreased from 130 per cent to 86 per cent.  

Tax credits for small businesses will be less generous from April 2023, following concerns the UK is lagging behind other countries in terms of R&D investment. 

The decision was also reportedly made in response to fears that the generous scheme would be taken advantage of by fraudsters and spurious claims.  

Plans from a Treasury consultation now include the replacement of both these existing R&D tax schemes with a single, combined scheme based on RDEC.  

A consultation document from the Government published on January 13 reportedly acknowledged that there was “merit to the case for further support” to SMEs, particularly in the life sciences sector. 

Treasury believes the move will simplify the R&D tax system and bring the UK in line with other countries.  

However, the level of support for SMEs is still expected to come under what it was prior to the Autumn Statement.  

Small businesses spent £24bn on R&D in 2021, 4 per cent more than their spending in 2020.  

R&D credits are typically used by tech and biotech companies and the government recently announced it was aiming for the UK to become a science superpower.  

The FSB, however, have expressed scepticism about the new changes saying it “risks a huge amount of disruption for little gain”. Others reportedly welcomed the decision but said it was unclear how many companies it would help.


Source: SmallBusiness.co.uk

(Link and quotes via original reporting)

A UK government consultation document has acknowledged there is “merit to the case for further support” to small and medium-sized businesses, SmallBusiness.co.uk reports.

In the document, published on January 13, the Government proposed bringing in R&D tax benefits for small businesses after plans to cut an existing incentive.  

Chancellor Jeremy Hunt cut R&D rebalanced investment incentives towards larger companies in November’s autumn statement. The move reportedly caused a backlash from trade bodies. 

The Research and Development Expenditure Credit (RDEC) rate for larger businesses increased by 7 per cent while the small and medium-sized enterprises additional deduction decreased from 130 per cent to 86 per cent.  

Tax credits for small businesses will be less generous from April 2023, following concerns the UK is lagging behind other countries in terms of R&D investment. 

The decision was also reportedly made in response to fears that the generous scheme would be taken advantage of by fraudsters and spurious claims.  

Plans from a Treasury consultation now include the replacement of both these existing R&D tax schemes with a single, combined scheme based on RDEC.  

A consultation document from the Government published on January 13 reportedly acknowledged that there was “merit to the case for further support” to SMEs, particularly in the life sciences sector. 

Treasury believes the move will simplify the R&D tax system and bring the UK in line with other countries.  

However, the level of support for SMEs is still expected to come under what it was prior to the Autumn Statement.  

Small businesses spent £24bn on R&D in 2021, 4 per cent more than their spending in 2020.  

R&D credits are typically used by tech and biotech companies and the government recently announced it was aiming for the UK to become a science superpower.  

The FSB, however, have expressed scepticism about the new changes saying it “risks a huge amount of disruption for little gain”. Others reportedly welcomed the decision but said it was unclear how many companies it would help.


Source: SmallBusiness.co.uk

(Link and quotes via original reporting)

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