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Loss-making businesses will be able to claim a payable research and development (R&D) credit, under new proposals from the government.
The Treasury has launched a consultation on plans for an above-the-line R&D relief that would be have broader appeal than the current arrangement, which can be claimed by companies only when they become profitable.
Final rates for the proposed new credit, including the payable part, will be decided following the consultation's close on 29 June, although the minimum rate will be 9.1% before tax, as announced in last week's Budget.
The current relief is a super-deduction, which reduces taxable profits. The proposed update will be calculated as a percentage of a firm’s R&D spend and recorded in accounts as an above-the-line expense.
The new measure will bring UK support for R&D in to line with countries including France, Canada, and Ireland. It is not proposed to change the existing small and medium sized enterprise scheme to an above-the-line credit.
PricewaterhouseCoopers partner Diarmuid MacDougall claimed the planned credit would make UK R&D ‘more competitive on cost and should enable budget holders to factor it into investment appraisals’.
But it was ‘disappointing that efforts to minimise the cost of funding the credit have resulted in proposals to discount the amount paid to companies with losses.
‘The proposals, which suggest the payable credit should be perhaps 6% rather than 7.8%, are complex and may jeopardise getting it above the line,’ said Mr MacDougall.
