The Autumn 2018 Budget had one notable change to the SME R&D tax credit scheme that will come into effect from 1 April 2020. From then, for any accounting periods commencing on or after 1 April 2020 a PAYE Cap will be introduced, the official line being;
“Preventing abuse of R&D tax relief for small and medium-sized enterprises (SMEs) – To help prevent abuse of the payable credit, from 1 April 2020, the amount of payable R&D tax credit that a qualifying loss-making company can receive in any tax year will be restricted to three times the company’s total PAYE and NICs liability for that year. This will ensure the relief is robust against identified abuse, including fraud, following the prevention by HMRC of fraudulent claims worth £300 million. The government will consult on this change”.
Although this is not imminent, it might be worthwhile considering if this will affect you, particularly if you are a business with very few salaried staff and tend to engage with third party workers. We see this often with start ups in the Tech industry who often engage contractors for their development work. There is the potential that a whole claim could be wiped out by structuring your business this way so, it is worth talking to the specialist R&D advisors here at Shorts Radius team who can help you to maximise your R&D claim and plan for this change.
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