Concern over R&D tax changes

SMALL and medium-sized businesses in the North West could lose out a share of £1bn worth of research and development tax breaks, if planned changes go ahead, according to accountants Grant Thornton.

The Government is considering refocusing R&D tax breaks on hi-tech companies as part of a consultation process which ends on  February 22.

The relief is presently claimed by some 8,350 UK firms, including many in this region, but GT fears that if the particular definition of what constitutes a ‘high-tech firm’ is implemented, many smaller companies will lose out.

Only companies which spend more than 4% of turnover on R&D would be deemed eligible for tax breaks if the Organisation for Economic Co-operation and Development (OECD)’s definition of what is a high-tech firm –  is used.

Ian Rowland, head of Grant Thornton’s R&D tax team in the North West said: “We share the coalition government’s view that the tax credit scheme has a key role to play in supporting innovation in British companies. 

“However, in our view more focus should be given to helping early stage SMEs and start-ups, which face higher barriers to maintaining a sustained R&D programme.

“Our clients’ experiences demonstrate that R&D is pursued across a wide range of sectors, including – but in no way limited to – life sciences, manufacturing, engineering and IT.

“Companies of every size, in all of these sectors, are investing in the UK’s future income streams. Therefore, we believe that removing companies from the scheme by reference to their size or their sector would have a negative impact on the economy.”

Grant Thornton will be putting its concerns to HM Treasury before the consultation closes..