The Chancellor has cut the rate of research and development (R&D) tax relief for small businesses, in a “hugely disappointing” move for startups.
In his Autumn budget, Jeremy Hunt slashed the relief from 14.5 per cent to 10 per cent, which may see the UK’s SMEs struggle to secure enough funding for R&D, according to the legal director of law firm Pinsent Masons, Penny Simmons.
“The SME tax reliefs can provide a vital source of financing to start-ups,” said Simmons. “Without access to the cash repayment, many start-ups may struggle to secure adequate funding to progress R&D and ultimately new UK based innovations.”
While the Chancellor did lift the R&D expenditure credit (RDEC) from 13 per cent to 20 per cent, the RDEC is not as valuable to startups as it doesn’t provide a cash repayment.
Mark Tighe, CEO of innovation funding specialist Catax, added that the move “lets smaller UK businesses down at a time when they need it most”.
“The revenues generated by businesses claiming R&D tax credits are the same pounds that end up running our hospitals and our schools.”