The Finance Bill includes the increase in the rate of R&D relief for SMEs to 225% with effect from 1 April 2012, now that State Aid approval has been granted. This increased rate of relief also applies to pre-trading expenditure. In order to pay for this increase, vaccine research relief is being withdrawn for SMEs, and the payable credit is also being reduced to 11%.
A benefit for start-ups is that the restriction in the amount of the R&D relief to a company’s PAYE/NIC liability will be removed for accounting periods ending on or after 1 April 2012. R&D relief is subject to the requirement that the claimant is a going concern.
The requirement for minimum expenditure of £10,000 a year will be removed for accounting periods ending on or after 1 April 2012.
There is also a change to the definition of ‘externally provided worker’, so that the requirements to be met in order to include the costs of temporary workers in a claim will be relaxed from 1 April 2012. The requirement will now be that the individual must provide their services to the claimant company under the terms of a contract between themselves and another person (not the claimant company). The relevance for SMEs is that they can often lack the specialised R&D staff they need, and bring them in on a temporary basis through a temporary agency.
Included in the Autumn Statement was the announcement that an ‘above the line’ tax credit would be released for consultation in the 2012 Budget and legislation will be included in Finance Bill 2013.
For further information or advice on this topic please contact Ward Williams.
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