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R&D Tax Relief – Budget change will increase cash claims for loss making SMEs

The Government announced a change to the R&D tax relief scheme earlier today, which will increase the amount of tax free cash that loss making companies can claim from HMRC under the SME scheme.

If a company spends (for example) £100,000 on R&D it can claim a tax deduction equivalent to 225% of the amount actually spent, and tax losses of up to £225,000 may be surrendered to HMRC for a tax free cash payment. This part of the rules remain unchanged. However, what has changed is the rate at which these tax losses can be converted into cash.

This rate is currently 11%, and therefore a company can currently claim up to £24,750 of tax free cash from HMRC (based on the £100,000 spend). However, for expenditure incurred on or after 1 April 2014 this rate will increase to 14.5%, and therefore the tax free cash that could be claimed will increase to £32,625 – an increase of £7,875.

Paul Arnold – Bevan & Buckland Tax Partner

Paul is an R&D and Patent Box specialist. In addition to advising many owner managed businesses he has also advised some of the largest companies in the UK, including FTSE 100 companies and large multinational groups.

If you require any more information please contact Paul on 01792 410100 or and he will be able to assist you further.

Bevan Buckland Accountants Swansea Tel: 01792 410100

Bevan Buckland Accountants Haverfordwest Tel: 01437 760666

Bevan Buckland Accountants Pembroke Tel: 01646 682383

Bevan Buckland Accountants Carmarthen Tel: 01267 233115