Tax rebate for R&D projects

The coalition government has indicated that small and medium-sized businesses will be able to claim tax back on investments made in research and development even if they don’t own the intellectual property rights to the work.

The publication of this year’s third finance bill abolishes the requirement for small or medium-sized companies seeking tax repayments on research and development to own the intellectual property on which the R&D was focused.

The draft legislation will undergo a second reading later this month and if it comes into force it will allow companies to obtain 24.5% cash back on their R&D spend.

The proposals were originally outlined in Alistair Darling’s pre-Budget report of 9 December 2009 and this will be maintained as the effective date from which the rebate will apply.

Laurence Bard, partner at BTG Tax, said it was a positive move and could encourage more firms to pursue R&D projects.

He said: “It sends out a signal that the UK presents a tax friendly environment for R&D activity among SME’s and is an encouraging sign for further investment including inward investment in the important SME sector.”