New research has found that under proposed changes to the government’s R&D tax credit scheme, UK startups could be left out of pocket to the tune of £100,000.
The Coalition for a Digital Economy (Coadec) published a study revealing that after the changes to the scheme, startups are likely to lose between 30-40% of previously expected savings.
Will Changes to the R&D Tax Credit Scheme Hurt Small Businesses?
Coadec, a non-profit focussed on the policy interests of UK tech startups, surveyed over 250 founders on the upcoming changes to the R&D tax credit scheme.
Small business R&D tax relief is due to drop from 130% to 86% in April, whereas the SME credit rate will fall from 14.5% to 10%.
Should the cuts to the scheme go ahead as planned, business owners with a focus on research and development could find themselves in a precarious financial position, with 97% of survey respondents commenting that such a change would severely impact their company.
Moreover, 89% of respondents believe that shifting the goalposts of the current schemes governing R&D tax credits, would likely dent the UK’s attractiveness as a leading hub for startups and innovation.
Dom Hallas, Executive Director of Coadec, said: “This data is clear – startups are terrified of the changes planned for April this year. If the government goes ahead, it will crush some companies and damage many others”.
“The outcome would leave the jobs and innovation engine of the British economy severely damaged for years to come. We hope the government reconsiders.”
As it stands, there are currently two R&D tax relief schemes in place; the Research and Development Expenditure Credit (RDEC) and the small and medium enterprises (SME) R&D relief.
The consultation, which will run until 13th March 2023, seeks to outline a proposal on how a single scheme could be designed, implemented and replace the incumbent programmes.
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