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Increasing Small and Medium Enterprises (SMEs) payable Research and Development (R&D) tax credit

Legislation will be introduced in Finance Bill 2014 to increase the rate of R&D payable credit for loss-making SMEs to 14.5% from 11% for qualifying expenditure incurred on or after 1 April 2014. This will increase the rate of the cash credit payable to SMEs that conduct R&D, but do not have corporation tax liabilities.

Seed Investment Schemes (SEIS) made permanent

Two years after establishing the Seed Enterprise Investment Scheme (SEIS), the government has announced that its success has led to a decision to make it permanent.

The initiative means that SEIS investors can commit up to £150,000 in a single company, and in return receive tax relief of 50 per cent on their income tax for the year the investment is made.

Annual investment allowance: increase to £500,000 for extended temporary period

The measure increases the maximum amount of the annual investment allowance (AIA) to £500,000 from 1 April 2014 for corporation tax (CT) and 6 April 2014 for income tax (IT) to 31 December 2015, after which it will return to £25,000.

Enterprise Zones (EZ): Enhanced Capital Allowances (ECAs)

Legislation will be introduced in Finance Bill 2014 to extend the period in which 100% ECAs are available in EZs by 3 years until 31 March 2020, and to include a power to make future extensions to the duration of ECA schemes by Treasury Order. A pilot EZ will also be established in Northern Ireland. ECAs are available to companies investing in qualifying plant and machinery on designated sites within EZs. These changes will have effect from Royal Assent to Finance Bill 2014.

Enhanced Capital Allowances (ECA) for zero emission goods vehicles

The government will extend the ECA for zero emission goods vehicle to March/April 2018. However, to comply with EU State aid rules the availability of the ECA will be limited to businesses that do not claim the government’s Plug-in Van Grant. Legislation will be in Finance Bill 2015.

Our Perspective

It is evident that the Government, through the corporate tax system, is very actively encouraging companies to seriously address the issues of growth, investment and global competitiveness.

Forms of investment support are there for R&D, investment in SMEs and ranges of increased allowances that cumulatively are very valuable for UK registered businesses.

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