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
(ATL) |
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.
