Changes for R&D Tax Credit Payments from April 2021
The rules regarding R&D tax credit claims for the SME scheme are changing from April 2021, which could affect many small businesses' ability to obtain this important tax relief. HMRC is looking to introduce a new PAYE cap on qualifying expenditure from this date to prevent abuse of the R&D tax credit system.
The change limits the payable TAX credit to £20,000 plus 300% of the combined PAYE and NIC.
The PAYE & NIC is for the total the company spends on all staff, not the totals for R&D employees.
PAYE & NIC from subcontracted R&D or EPW’s providers can be included in that 300% figure, so long as the companies are connected and the value is less than 15 per cent of its overall R&D expenditure.
The measure will have effect for accounting periods beginning on or after 1 April 2021.
This is only applicable to tax credits, not tax refunds.
A company making a small claim for payable credit below £20,000 will not be affected by the cap, but enterprises that subcontract their R&D activities to non-connected companies, and individuals, may no longer be able to claim the full credit.
However, a company’s claim will be exempt from the new measures if its employees are creating, preparing to create, or actively managing intellectual property (IP).
The new rules also create additional checks and processes when making a claim, and so businesses should seek professional advice from experienced R&D tax advisers when assessing R&D projects.
