Consultations & legislation
Research & Development (R&D) Tax credits: response and further consultation
Issued: 10 June 2011
Open date: 10 June 2011
Close date: 02 September 2011
Background
A formal consultation on the support R&D tax credits provide for innovation and the proposals of the Dyson Review was held in 2010.
Following the 2010 R&D tax credits consultation the Government announced reforms to the R&D tax credits schemes at Budget 2011 and published a full response on 11 June 2011.
That response also launched this further consultation seeking views on proposals to simplify the schemes and make them more effective, including relief for Qualifying Indirect Activities; how to give relief for subcontracted ‘routine’ activities; the removal of the PAYE/NICs cap and potential changes to the ‘going concern’ definition.
The Government also requested comments on the proposal put forward by a number of respondents to move from the current ‘superdeduction’ system to one which delivered a credit against tax liability.
- Research and Development tax credits: response and further consultation (PDF 286KB)
- Press release: Government publishes consultations on Patent Box and R&D credits
Consultation response
The further consultation closed on 2 September and the Government response published on 6 December 2011.
We would like to thank all those who contributed to the consultation, either by submitting written responses or in forum discussions through a working group hosted by HM Treasury, HMRC and BIS.
Above the line credit
Following the further consultation the Chancellor has announced in his Autumn Statement, that the Government intends to introduce an ‘above the line’ tax credit in 2013 to encourage research and development activity by larger companies. The Government will consult on the detail at Budget 2012 and will ensure that the level of SME R&D relief is not reduced as a result of this change.
Following consultation in 2012 on details, legislation for an ‘Above the Line’ R&D tax credit will be included in the draft Finance Bill published in the autumn of 2012.
Other changes
- No changes will be made regarding Qualifying Indirect Activities or sub-contracting, (although the Government recognises that further work on sub-contracting is needed).
- The existing definition of when a company is a "going concern" will be clarified to confirm that companies in administration or liquidation are excluded from claiming relief. This change will be included in the draft Finance Bill legislation published 6 December 2012.
Update to R&D legislation
Following Budget 2011 announcements and consultation the draft Finance Bill legislation published today (6 December 2011) contains the following changes to R&D tax relief from April 2012:
For SMEs
- The SME R&D relief will be further increased giving relief of 225 per cent of qualifying expenditure;
- The rate of payable credit for SMEs will be reduced to 11 per cent, and Vaccine Research Relief for SME companies will be withdrawn;
- The rule limiting the payable credit to a company’s PAYE/NICs liability will be removed.
- Following the further consultation on R&D tax credits, the existing definition of when a company is a "going concern" will be clarified to confirm that companies in administration or liquidation are excluded from relief.
For all companies
- The requirement for minimum expenditure of £10,000 pa will be removed.
- In addition to the announcements made at Budget, the definition of an "externally provided worker" will be widened to allow claims for staff provided indirectly through more than one party.
Related links
If you would like us to add you to our distribution list and inform you of R&D tax credit updates, please email Aili Nurk.
Contact us
Post
Aili Nurk
Excise and EnterpriseTax Team
HM Treasury
1 Horse Guards Rd
London
SW1A 2HQ
Share
