UK R&D Tax Credit Changes To Benefit SMEs

by Robin Pilgrim, LawAndTax-News.com, London

01 October 2003

Changes to the UK's Research and Development (R&D) tax credit regime designed to benefit small and medium-sized enterprises (SMEs) came into effect at the weekend, according to Paymaster General, Dawn Primarolo.

Currently, UK firms can claim additional tax relief (R&D tax credits) for qualifying expenditure. SMEs can claim an extra 50%, giving 150% relief in total, and other companies can claim an additional 25%, bringing the total to 125%.

However, under the terms of the new rules, which were included in the 2003 Finance Act and came into force on Saturday, the threshold for annual qualifying R&D expenditure has been reduced from £25,000 to £10,000, meaning that more small and medium-sized firms will be able to claim the credit.

Other changes to the R&D rules include the ability to claim for the cost of agency workers employed in this area, and improvements to the rules governing employees who only spend part of their time at work undertaking R&D activities.

In a statement released on Monday, Ms Primarolo announced that:

"The support provided to UK companies for research & development activity is among the best in the world. This further boost will extend that support to more companies, increasing innovation and productivity."

Similar measures for larger companies were brought into force by Schedule 31 of the 2003 Finance Act earlier this year.

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