In 2000, Research and Development Tax Credits (RDTC) were introduced. These tax credits were designed so that research and development could be incentivised through lower payable credits or corporate tax. The government predicts that for every £1 that the Treasury forgoes for Research and Development Tax Credits, it stimulates between £1.53 and £2.35 of additional R&D.
While there is no denying that Research and Development Tax Credits have been a key part of the business tax roadmap since they were introduced, there are restraints on the horizon for the first time. Since the scheme was introduced 19 years ago, it has only ever been made more lucrative and more enticing for business owners. However, when the budget was announced last year, it was revealed that the government were planning to make a dedicated effort to make sure that abuse of the regime was deterred. Because of this, it means that the payable credit to the business that was making a qualifying loss would be capped. This cap is set at three times the business’ total NICs and PAYE. This is set to come into play from April of next year.
However, Exeter accountants and accountants across the rest of the United Kingdom are worried about the implications that this is going to have for their clients. They are worried that this blunt approach is going to have a genuinely destructive impact on genuine small-to-medium businesses that are in the early stages of their lifecycle. This is when companies genuinely need the support that is provided by Research and Development Tax Credits. Because of this, these limitations could end up hurting those that need the tax credits the most, rather than those that are purely abusing the system.
This could not come at a worse time. After all, SMEs already have concerns when it comes to the spectre of European grants and funding falling away. This means that Research and Development Tax Credits, more than ever before, are a tool for facilitating the improved funding of the knowledge economy. However, by stripping this back, the impact could be devastating for a lot of businesses.
This also highlights why it is so important for businesses to find a quality accountant who can help them to make the most of Research and Development Tax Credits and to ensure they stay up to date with all of the legislation that is in place so that they do not end up missing out or hurting their business.
This form of tax help should be provided by specialist tax accountants who have the necessary experience to advise on these matters because they are heavily ingrained in the industry. They will ensure your business proves it is not abusing the system and that it does not miss out on the help that is still available.