R&D tax change a big boost for business innovation

R&D tax change a big boost for business innovation


The Chartered Institute of Taxation (CIOT) has welcomed the announcement that the rate of the payable research and development (R&D) tax credit for small and medium-sized enterprises (SMEs) will be increased to 14.5% for expenditure incurred from 1 April 2014.


David O’Keeffe, Chairman of the CIOT’s R&D working group, commented:


“This is great news for forward-thinking businesses. Research and development is key if we are going to keep the UK at the cutting edge of technological innovation.


“Loss-making SMEs with qualifying R&D expenditure are able to surrender their R&D-related losses for a payable tax credit from HMRC. Currently, the credit is given at the rate of 11% but this will increase to 14.5% from 1 April 2014, putting more cash back in the hands of SMEs and encouraging further investment in R&D.


“For every £100 spent on R&D, the SME can claim a tax deduction of £225. If the full amount is surrendered, the SME will receive approximately £33 from HMRC at the new rate; almost £8 more than under the current rate. This means that loss-making SMEs can now claim almost a third of their R&D costs back from HMRC.


“R&D tax relief is one of the most successful tax reliefs introduced in the UK, having supported almost £12 billion of R&D expenditure in 2011/12 alone. The increase in the rate of the payable tax credit, combined with the positive changes made in the past few years, can only boost R&D activity in the UK.”



Notes to editors:


1.       An SME is a company which has fewer than 500 employees and either an annual turnover not exceeding €100 million or a balance sheet not exceeding €86 million.

2.       £12 billion of R&D expenditure in 2011/12 figure from HMRC publication Research and Development Tax Credits Statistics available here http://www.hmrc.gov.uk/statistics/research-tc/rd-introduction.pdf.

3.       The Chartered Institute of Taxation

The Chartered Institute of Taxation (CIOT) is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.

The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries.  The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.

The CIOT’s 17,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.

George Crozier
External Relations Manager

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