Treasury coughs £80m tax credit for R&D

Eagle pulls small biz up by scruff of its neck

By Kelly Fiveash • Get more from this author

Posted in Small Biz, 1st August 2008 10:51 GMT

The UK government will dish up an extra £80m a year in tax credits to encourage small businesses to invest in more research and development.

From today (1 August) the total tax relief available to SMEs will be set at around £300m a year, said Exchequer Secretary to the Treasury Angela Eagle MP.

The government hopes that pumping more cash into tax credits will persuade small and medium-sized companies to spend more on developing new and improved products.

Eagle said the rate available for qualifying SMEs investing in R&D will increase from 150 per cent to 175 per cent of their outlay. The Treasury has also upped the size of a firm that can qualify for tax relief from 250 staff to up to 500 employees. The associated limits on balance sheet value and turnover will also be doubled.

“The R&D tax credit schemes are the government's most important policy in support of R&D investment by companies in the UK," said Eagle. "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 £1bn 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.”

Presumably, it's also a move to encourage businesses in Blighty to compete more effectively on the global stage. However, whether the extra £80m represents a significant boost for UK tech firms remains to be seen.

According to a recent report from non-profit research group Rand Corporation, the US remains significantly ahead of the pack in the science and technology sector, investing some 40 per cent of the world’s total R&D spend. ®

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