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.