R&D tax relief – upcoming changes
After a recent announcement from HMRC new rules will come into effect from 1 April 2021 for SME businesses. The new rules are being implemented to target fraudulent claims using UK companies to claim a repayable credit even though no R&D is being carried out in the UK.
The new rules apply a cap on the amount of payable R&D tax credit an eligible loss-making company can claim. It is important to note that the new rules only apply to loss making businesses or where your R&D claim takes you into taxable losses. The cap will affect claims for accounting periods commencing on or after 1 April 2021.
What is the cap?
The cap limits the payable R&D tax credit to three times the total annual PAYE and NIC liability of the company plus £20,000.
I’m claiming R&D tax credits, will I be affected?
If your claim meets any of the below criteria, you will not be affected.
- You claim under the RDEC Scheme (large company)
- Your R&D claim doesn’t take you into taxable losses in the accounting period
- Your payable R&D tax credit is less than £20,000
A company may also not be capped if it meets the criteria of the following two tests:
- The company’s employees are creating, preparing to create or actively managing IP arising from the R&D project.
- The expenditure on subcontracted work or agency workers is less than 15% of the overall R&D expenditure.
Even though the new cap is designed to target fraudulent claims, there will be many genuine SME claims who will be affected by the new rules. If SMEs outsource large elements of their projects or have large consumable costs, they may well be impacted by the new cap.
If you have any questions about the new claim cap rules then please contact us using our details below:
(E) firstname.lastname@example.org or (T) 01908 219100 (W) advaloremgroup.uk