United Kingdom

Key Measure: Research & development tax credits reform: Above the Line 

KPMG Budget 2013

Description of Measure


It is pleasing to see that the Government has re-iterated its commitment to large company research and development (R&D) relief, and has increased the rate of the new R&D credit to 10% of qualifying expenditure, before tax is deducted.  The benefit, net of tax, rises to 8% by 2016, compared to the falling benefit of the existing 130% enhanced deduction regime, as set out in the table below. This gives companies additional incentive to elect into the new regime early.



 Year CT rate

Net tax benefit


Net tax benefit

(enhanced deduction)

 2013/14 23% 7.7% 6.9%
 2014/15 21% 7.9% 6.3%
 2015/16 20% 8.0% 6.0%


Although concerns had been raised about the effect of the proposed PAYE/NIC cap where EPWs make up a large part of an R&D claim, no formal statement has been made to date by the Treasury or HM Revenue & Customs as to possible changes to the draft legislation in this respect.

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