Budget 2018: the chancellor announced new measures in Preventing the abuse of Research & Development Relief by SMEs.

From April 2020:

  • The amount of payable credit that a qualifying loss-making business can receive through Research & Development tax relief in any one year will be capped.
  • The cap will be three times the company’s total PAYE and NICs liability for that year.
  • The measure is deter abuse because fraudulent companies typically do not employ many people or pay PAYE and NICs or have a real UK presence.

As some genuine companies with UK R&D activity may have low PAYE and NICs liability relative to their R&D spend companies will still be able to claim payable credit up to the cap with any unused losses carried forward to be set against future profits.

The government will consult on how the cap will be applied, to minimise any impact on genuine UK businesses.

Useful links:

Budget 2018 live highlights

Budget 2018 summary


External link

HM Treasury: Preventing the abuse of Research & Development Relief by SMEs