SME payable tax credit to be increased – 2014 Budget announcement

John Moore, March 19th, 2014

In a further measure to provide SMEs with incentives to invest in R&D the Chancellor today announced an increase in the rate of the payable tax credit for companies claiming the R&D tax relief payable credit for SMEs.

The rate is currently 11% and will rise to 14.5% for qualifying expenditure incurred on or after 1 April 2014. When a company claiming under the SME R&D tax relief scheme does not have a corporation tax liability to set an R&D claim against it may opt to surrender the enhanced R&D expenditure, currently at 225% of the qualifying expenditure, at the rate of 11%. For a company with qualifying expenditure of £1,000 it can currently obtain a cash repayment of up to £247.50p in respect of that expenditure if it does not have a corporation tax liability that the relief can otherwise be set against.

Under the proposed change, to be included in the Finance Bill 2014, qualifying expenditure of £1,000 incurred on or after 1 April 2014 could lead to a repayment of up to £326.25p. HM Treasury have estimated that this additional investment in the SME R&D tax relief scheme will cost an additional £5m in 2014-15 rising to £50m in 2015-16.

Our view

This is a welcome vote of confidence in the economic benefit the SME R&D tax relief is delivering both to deserving technology SMEs and to the wider economy. Companies not yet paying corporation tax will be able to access more funds in the form of the payable tax credit from the Government in the future.

Please do not hesitate to contact John Moore on 0207 292 8850 or at if you would like to discuss the implications of this for your company.

This briefing is prepared by Kingly Brookes LLP, a limited liability partnership. For further information on any of the material contained in or referred to in the briefing, please contact us. This briefing note is intended to keep our readers up to date with the developments in this area, but it is a general guide only and is not intended to be a comprehensive statement of the law and practice in this area. No liability is accepted for the opinions it contains or for any errors or omissions.