Increase in Research & Development Tax Relief won’t benefit SMEs

Publications featured in include: Daily Mail and This Is Money
  • Only larger corporations stand to benefit from the increase

Plans to increase the Research & Development Expenditure Credit (RDEC) from 12% to 13%, announced in the Budget, will mostly benefit larger corporations.

Our research shows that the increase won’t help small and medium businesses, who are in greater need of tax relief to help fuel their R&D activities, unlike larger corporations that are likely to already have a significant budget for R&D expenditure. In addition, the small increase in tax savings, from 9.72% to 10.53%, will not be a great incentive for large enterprises either and will be unlikely to impact on their decision to carry out R&D in the UK.

RDEC is usually claimed by large companies, with SMEs only entitled to claim under certain circumstances, if they have been subcontracted work or have received a grant. There were no changes made to the R&D regime specifically aimed at SMEs, other than to delay the spending cap linked to the company’s PAYE bill until 1 April 2021.

Nikhil Oza, corporate tax director at our London office says: “It’s surprising that the Government is taking very little action to help small businesses invest in research and development.”

“The Government has emphasized that it wants to encourage growth amongst tech start-ups and other small innovative companies but this policy does little to help businesses that need the most support.”