BIA opposes government proposals to amend R&D tax relief for SMEs

Government proposals to cap R&D tax relief for SMEs could have a major impact upon legitimate companies with low employee levels, such as start-ups and companies which outsource R&D activities.

The BioIndustry Association (BIA) has opposed government proposals to place a cap on the R&D tax relief system for SMEs, in a bid to prevent fraudulent abuse of the system. This proposal comes in the wake of HMRC identifying and preventing abuse valued at over £300 million, and a 33% cost increase between the 2014/15 and 2015/16 financial years.

The proposed cap would be valued at three times the relevant company’s annual PAYE and National Insurance Contributions (NIC), which would help to prevent abuse by companies with little or no activity in the UK.

However the BIA is asking the government to reconsider its proposal, as it estimates that around 50-60% of genuine SMEs will be affected by this change. Start-ups and companies which heavily outsource R&D activities will be particularly affected, and may not have the capacity to increase internal activities and employee levels.

The BIA also claim that this change will make it harder for the government to reach its goal of spending 2.4% GDP on R&D by 2027.

Chief Executive of the BIA, Steve Bates, has commented that:

‘While the government’s consultation was done with the best of intentions, if these proposals are introduced, it could put a hard brake on the UK’s rapidly expanding biotech start-up and scale-up community and affect other tech sectors in similar ways. It will also have knock-on effects for hundreds of service and supply SMEs across the UK who will see a loss of business, as well as universities and hospitals that receive significant funding from industry and conduct clinical research.’

The government’s public consultation is due to close on 24th May 2019, and the BIA strongly urges affected companies to respond here.

For further information, you can read the BIA’s official press release here. Further consultations can be viewed on MAP’s consultation tracker.

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Published on 15. May 2019 in News, News UK