In an attempt to prevent abuse of the R&D system, the Government is changing the limit for SME tax credit repayments. Similar to the RDEC scheme, a PAYE cap will be introduced which will limit the amount of payable tax credit, based on the PAYE and NIC costs that a company has incurred in the claim period.
The draft tax legislation has been published for the Finance Bill 2021. This includes the draft legislation for the R&D SME scheme and the new PAYE/NIC cap.
The changes to the scheme will apply for all accounting periods beginning on or after 01 April 2021.
A SME can claim up to £20,000 plus 300% of its total Pay as you Earn (PAYE) and National Insurance Contributions (NICs) liability for the period.
A company will be exempt if:
- its employees are creating, preparing to create or managing Intellectual Property (IP)
and - it does not spend more than 15% of its qualifying R&D expenditure on subcontracting R&D to, or the provision of externally provided workers (EPWs) by, connected persons
Companies can include related party PAYE and NIC liabilities attributable to the project, these will be multiplied by 300%.
If you have any concerns regarding the impact of this to your claim please get in touch.
Written by Laura Hankey