Chancellor Rishi Sunak has suggested SME businesses are not investing enough into Research & Development (R&D) tax credits to make the current system viable.

The Chancellor is frustrated that despite spending “huge and rapidly growing sums” on the tax credit scheme, the amount of growth being generated is falling short. The Office for Budget Responsibility estimates that the cost of the reliefs will increase from £7.7bn in 2021-22 to £11.9bn in 2026-27.

HMRC has found that SMEs generated between just £0.60 and £1.28 of additional R&D expenditure for each £1 of tax relief claimed, compared with up to £2.70 for larger companies. The Chancellor is therefore weighing up whether this investment would be better focused on larger corporates, rather than SME businesses.

Many small business owners will have, in recent years, struggled to invest into their businesses. A combination of the pandemic’s detrimental effects, and the rising price of energy and materials have preventing companies from taking advantage of the R&D tax credit system.

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If you would like to discuss the availability of R&D tax incentives in the context of your own business, please get in touch with our tax team on 01788 539000 or 0116 261 0061, or email us at [email protected].

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