The current rate of R&D tax credit for SME businesses is 75% of the amount spent, so that a business can obtain tax relief for 175% of the amount of qualifying expenditure.
The rate of relief is to be increased from 1 April 2011 to 100%, so that a business will benefit from 200% tax relief on qualifying expenditure. This means that the tax system will contribute a maximum of £55 for each £100 of qualifying expenditure for businesses in the marginal corporation tax band of 27.5%. Relief at the small profits rate will be worth £40 per £100 spent.
There have been no changes to the R & D rate available to large companies which is currently 30%.
Further changes will come in 2012. Where R & D losses are surrendered for payable tax credit relief, the limit of the relief to the amount of PAYE and NIC paid in the year will be abolished, as will the minimum spend of £10,000. Further changes will be proposed following the Dyson report, to which a detailed response will be published in May.
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