Businesses wishing to claim research and development (R&D) tax credits during the current economic downturn face a 'cruel irony', KPMG has warned.
The tax advisory giant highlighted recent legislative changes that increased the number of companies able to claim a cash rebate in the form of R&D credit. Businesses must be loss-making and must qualify as small and medium-sized enterprises (SMEs).
The rate available for firms investing in R&D was boosted in August to 175% of their investment (from 150%) - and the total relief available in the UK was raised to about £300 million a year, in an attempt to encourage innovation by SMEs.
KPMG remarked, however that a new 'legal Catch 22', agreed by the EU, means firms reliant on R&D tax relief to remain going concerns are precluded from claiming the benefit.
The company's head of R&D tax credits, David O'Keeffe, said: 'There is a cruel irony in denying a business a lifeline that could save it precisely because without such support it will go bust.
'The reasoning… is that Europe does not want tax rebates propping up struggling enterprises.'
He added: 'Companies should most definitely make sure that they claim these valuable tax benefits, but if they're really in the last chance saloon, they may be out of luck'.
