The increase in research and development (R&D) tax relief has been welcomed by businesses after it was announced in yesterday’s Budget.
The tax credit for R&D will rise to 175% in 2008. Small firms will now also be able to claim a 100% relief for new capital investment up to £50,000, and claim a new tax credit for environmental investment
David Keeffe, tax partner at KPMG said the increase in rates for smaller and larger firms was very welcome and ‘may encourage companies who are currently missing out on the relief to claim their share’.
Diarmuid MacDougall, tax partner at PricewaterhouseCoopers, agreed the increase in tax relief would benefit companies.
“Clearly, this is good news for companies just above the small and medium size of enterprise thresholds” he said.
“All companies doing R&D will see the cash value of the incentives increase. This means that it is more important than ever that companies which may be entitled to the relief, but have not yet claimed, find out what their entitlement is. If they do not, the benefit they will forego is that much larger.”
However, despite welcoming the increase, Keeffe said it was ‘a shame’ the changes would not be made until next year.
“The proposed extension of the [small business] relief to companies with fewer than 500 employees (from fewer than 250) is also welcome but may increase complexity for companies moving between the two schemes,” said Keeffe.
“For example, a company that is currently claiming under the large company scheme may find itself within the [small business] scheme under these new rules. While the relief would be higher, the rules applying to the two schemes are different in certain key areas.”
© Crimson Business Ltd. 2007
