R&D tax credit consultation launched

The government has launched a consultation on the new above the line (ATL) research and development (R&D) tax credit for larger companies, to help shape the way it should work when it is introduced in April 2013.

The new credit was originally announced by the government in the autumn of 2011 and flagged up by Chancellor George Osborne in his 21 March Budget.

Launching the consultation on 27 March, David Gauke, Exchequer Secretary to the Treasury, said: “The ATL credit for R&D will encourage large company research and development, and ensure that the UK continues to be one of the most attractive places in the world to undertake R&D.”

The new ATL credit will be recorded in companies’ accounts as a reduction in the cost of R&D – i.e. as an ‘above’ the tax line – which will bring UK support for R&D into line with countries including France, Canada, Ireland.

It will be calculated as a percentage of the company’s R&D spend and Budget 2012 announced that the minimum rate would be 9.1 per cent before tax.

Loss-making companies will also be able to claim a payable credit. With the existing R&D tax credit, businesses must wait until they enter profit before they benefit from government support.

The small company R&D tax credit rate will rise from 200 per cent to 225 per cent from April 2012.

Existing R&D tax credit schemes provide around £1 billion a year support to around 9,000 companies carrying out over £10 billion of R&D expenditure.

Link: Consultation details