A further boost for high tech Britain with improved R&D tax relief

Cliona Kirby, Tax Partner, CMS

The announcement that the SME scheme rate of R&D relief will increase to 200% from 1 April 2011 and 225% from 1 April 2012 will be welcomed by the technology and life science industries who incur significant research and development expenditure.  It should also ensure that the UK becomes a more attractive jurisidiction in which to undertake R&D.  The existing R&D tax rules have been criticised for their complexity and the Government has taken a first step today towards simplification.  Certain restrictive elements such as the rule limiting a SME company’s payable R&D tax credit to the amount of PAYE and national insurance contributions it pays and the £10k minimum expenditure condition will be abolished.  We would welcome further simplicity in terms of the claims procedure to ensure greater access to such beneficial R&D reliefs by smaller companies. 

The detail of the proposed changes to enable relief for work done by sub-contractors under the large company scheme is as yet unclear although the ability to sub-contract was a key issue under the existing rules which needed to be addressed.

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