The take-up of the government’s “flagship” research and development (R&D) tax relief has been so low that it has “boosted the incentives” and “lowered the bar on conditions to make it easier for companies to qualify”, says Tax Tips & Advice.
The main changes are aimed at making the relief more accessible to small to medium-sized enterprises (broadly speaking, firms with fewer than 500 employees).
From 1 April, the tax relief on allowable R&D costs was raised from 200% to 225%. So for each £100 of qualifying costs, your company’s corporation tax bill could be cut by an extra £125 on top of the £100 spent, according to HMRC. So if your company spends £20,000 on R&D in a year in which it makes a taxable profit of £25,000, its taxable profit will actually be zero (125% of £20,000 = £25,000).
Also, there is no longer a minimum spend on qualifying R&D expenses (excluding capital equipment), of £10,000. It’s not all good news, however: vaccine research relief has also been withdrawn for small to medium-sized enterprises from 1 April 2012.