Both the SME and Large company R&D tax credit schemes have been enhanced.
Showing its continued support for innovation the Government will increase the small and medium-sized enterprise (SME) R&D tax credit from 150% to 175% of the qualifying expenditure and the large company R&D tax credit from 125% to 130% of the qualifying expenditure from April 2008. Legislation will also be introduced in Finance Bill 2007 to extend the more generous SME R&D Tax credit to mid-size companies with fewer than 500 employees, with the annual turnover and annual balance sheet limits for this relief being doubled to €100m and €86m respectively. However, to comply with European legislation regarding notified State Aid, the larger companies now entitled to this relief will only be able to claim the enhanced tax deduction and not a repayable tax credit.
Following on from a number of recent landmark cases where the definition of R&D for tax credit purposes has been extended to include areas of innovation not previously thought to qualify this will be a welcome boost to many pioneering businesses.
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