SME’s to Suffer after Hunt Reveals Credit Plans

Jeremy Hunt’s recent speech to Parliament revealed that he intends to reduce the amount that can be subtracted from a SME’s gross income to 86% from 130%, increasing the amount subject to taxation. He also announced he will cut credit rates from 14.5% to 10%, furthermore boosting Research and Development Expenditure Credit from 13% to 20%.

Tax expert Penny Simmons said that the reduction in payback rate to 10% “is likely to be detrimental to innovative start-ups” because these channels are “a vital source of financing” for SME’s.

“Reduced tax reliefs may prove to be an insurmountable stumbling block – particularly to start-ups in the life sciences sector and those focused on developing technology to support the UK’s net zero transition, which may have limited access to other sources of finances.”

According to the chancellor, the adjustments would lessen the amount of fraud and mistakes without significantly altering the amounts of R&D spending during the period.

Steve Bates of OBE said that “just weeks after official government statistics showed SMEs are investing £16 billion more than previously thought in R&D to create the UK’s innovation-based economy of the future, the Chancellor and Prime Minister are threatening to pull the carpet out from under their feet.”

Richard Torbett, CEO of the Association of the British Pharmaceutical Industry (ABPI), stated that the decisions made are “both essential to boosting the UK’s share of global pharmaceutical R&D spending and investment.”

Simmons described his displeasure over the administration’s decisions: “it is disappointing that the government has proceeded to cut SME tax relief now rather than wait to see whether new anti-abuse measures being introduced from April 2023 are effective.”

© Copyright 2010-2021 Zenopa LTD. All Rights Reserved.