New guidelines aid companies making R&D tax credit claims


by Kersten Muller of Deloitte

The recent Budget had few surprises for companies.

Of special interest to companies in the Cambridge area will be that, following the government's consultation on R&D tax credits, new guidelines were published and will come into effect for accounting periods ending on or after 1 April 2004. These guidelines are clearer and easier to use and should aid companies making R&D tax credit claims.

In addition, costs qualifying for R&D tax credits will include expenditure on software and utilities (power, fuel and water). This will take effect for large companies from 1 April 2004.

For small and medium sized enterprises (SMEs) and for the purposes of vaccines research relief, the change will take effect from a date to be announced, once State Aid approval has been obtained.

To accommodate companies adopting International Financial Reporting Standards (IFRS) from 2005, it was announced that R&D tax credits will be maintained by allowing relief for the expenditure as incurred, even if it is capitalised in the company's accounts under IFRS.

Other measures announced in the Budget include a minimum 19% tax on dividends paid to non-corporate shareholders on or after 1 April 2004, which affects companies with taxable profits of up to 50,000; and an increase in first year capital allowances from 40% to 50% for small businesses.

The higher rate will be available for expenditure on or after 1 April 2004 for businesses within the charge to corporation tax and 6 April 2004 for those within the charge to income tax. However, the 100% first year capital allowances for small businesses on Information and Communication Technology equipment will be abolished from 1 April 2004.

deloitte logoFor more detailed information on these and other Budget measures, please contact Kersten Muller at Deloitte.

29 March 2004

This article first appeared in Tangent, a fortnightly column offering business advice and comment


The Deloitte Cambridge office comprises 8 Partners and over 250 staff who deliver a full range of professional services to the East Anglian region. As well as focussing on the life sciences and technology sectors for which the region has become so renowned, the office has long standing specialisms in other sectors including the professions, consumer business, food and agribusiness.

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