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Angela Eagle announces 80 million boost for R and D Tax Credits


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Issued 31 July 2008

Tax Credits to encourage small businesses to invest more in research and development will increase by £80 million a year from 1 August, bringing the total tax relief available to around £300 million a year, Exchequer Secretary to the Treasury, Angela Eagle MP announced today.

The increased tax relief will encourage more of the UK’s innovative small and medium companies to invest in developing new and improved products. To enable companies to claim the additional tax relief, the rate available for qualifying small and medium-sized enterprises (SMEs) investing in R&D will increase from 150 per cent to 175 per cent of their investment.

The size of company that can qualify for tax relief will also increase, from 250 employees to up to 500 employees, with the associated limits on balance sheet value and turnover also doubling. The increase will help SMEs to grow into large R&D firms by continuing to provide the benefit of a higher rate of relief up to these new, higher limits.

Angela Eagle said:

‘The R&D tax credit schemes are the Government’s most important policy in support of R&D investment by companies in the UK. By increasing the value of the SME scheme by a third, we are showing our continued commitment to helping innovative UK companies invest to grow.

Today’s announcement will build on more than £1 billion worth of support already provided. The increase in the size at which a company can claim under the scheme will be a huge boost for the small R&D intensive companies that will be the large innovative companies of the future.


1. R&D tax credits were introduced in 2000 for small and medium-sized enterprises (SMEs) and extended in 2002 to large companies. They are a key part of the strategy to meet the Government’s R&D aspiration of raising R&D spending to 2.5 per cent of GDP by 2014.

2. The original scheme offers an enhanced deduction from profits for corporation tax purposes on qualifying expenditure on R&D. This deduction is 150 per cent for SMEs and 130 per cent (from April this year) for large companies. Loss-making SMEs can, in certain circumstances, surrender the relief for a payment worth up to 24 per cent of qualifying R&D expenditure.

3. The enhancements are accompanied by small revisions to the rules of the scheme to ensure it complies with the framework for State Aids for R&D within Europe, which limit the amount of aid that can be claimed per R&D project to €7.5 million, prevent companies in difficulties from claiming relief, and extend the relief to cover the cost of clinical trial volunteers and of compulsory social security contributions in other EEA states and Switzerland. Changes will also take effect for the special relief for vaccines research.

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Article Published/Sorted/Amended on Scopulus 2008-08-02 16:29:56 in Tax Articles

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