From April this year, reforms to the R&D tax-credit schemes become effective. For some, the changes will be welcomed but others will find they lose out on tax-savings in an economy with ever increasing costs.
To claim R&D tax credit as an SME you must have less than 500 staff, a turnover of under 100 million Euros or a balance sheet total under 86 million Euros. R&D Expenditure Credit (RDEC) replaced the large company scheme in 2016. In certain circumstances, SME’s can also claim RDEC if they have been subcontracted to a R&D project by a large company.
What are the changes?
- For large companies claiming Research and Development Expenditure Credit (RDEC), rates will increase from 13% to 20% for expenditure on or after 1st April 2023.
- The SME additional deduction will decrease from 130% to 86%, and
- the small and medium (SME) credit rate will decrease from 14.5% to 10%
Claims by SME’s have been higher than large companies which could indicate higher levels of innovation in small to medium sized companies, or a more proactive approach to claiming tax-credit. For them, this news is unlikely to be welcome particularly in the current climate with ever-increasing operational costs.
The disparity, however, may only be temporary as HM Treasury have begun an eight-week consultation period relating to the creation of a single, simplified scheme. If it gets the go-ahead it could come into force as soon as April 2024.
SMEs are innovators and a recent joint study between the EPO and EUIPO found that companies that own at least one patent, trade mark or registered design generate on average 20% higher revenues per employee and that there is a correlation of strong economic performance for SME’s compared to those that don’t own any IP rights.
At Wynne-Jones IP, we’re delighted to offer entrepreneurs, start-ups and SME’S a bit of extra help where it’s needed most. We offer a unique service, the Pioneer’s Platform, that helps businesses secure their first patent application at an affordable cost. It involves more input from the inventor, but our attorney’s will get you where you need to be.
For more information on the Pioneer’s Platform contact Rachel von Hossle at firstname.lastname@example.org