From 1 April 2021, HMRC are to introduce a limit on the amount of payable tax credits which can be claimed by a loss-making company. The refund will be restricted to £20,000 plus 300% of its PAYE and NIC liability for the period. Where the accounting year straddles 1 April 2021, the company will be treated as having two separate periods for R&D and the cap will apply from 1 April 2021. This was introduced as the tax credit has become a target for fraud and abuse and HMRC want to make sure that the relief only goes to those who should receive it.
There is an exemption from the cap for companies where its employees are creating or preparing to create IP or managing IP (which is defined by HMRC) and less than 15% of its R&D qualifying expenditure is spent with connected persons. This exemption should enable companies engaged in genuine, substantial R&D to continue to make full claims.
If you would like any further information about these changes, please contact Jeannette Hume on 01284 752313 or email firstname.lastname@example.org