Research & development payable tax credit restriction

In this week’s Budget the Chancellor has announced a re-introduction of a restriction to the amount of R&D tax credit relief that can be claimed. This is aimed at preventing abuse of R&D tax relief for small and medium-sized enterprises (SMEs).

The restriction will come into effect from 1 April 2020 and will mean the amount of payable R&D tax credit that a qualifying loss-making company can receive in any tax year will be restricted to three times the company’s total PAYE and NICs liability for that year.

Whilst there is clearly a need to try and prevent fraudulent claims, this seems like a case of papering over the cracks, rather than tackling those that commit fraud.

It will have a detrimental impact on those SMEs who take on R&D projects where they mainly engage with subcontractors to take on the work, but have small PAYE and NIC liabilities.

Author: Luke Thomas, Director, Plus Accounting

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