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Deloitte comments on today’s Finance Bill - R&D expenditure credits

28 March 2013

Carmen Aquerreta, who leads Deloitte's Research & Development practice, on today's Finance Bill said: “The introduction of R&D expenditure credits for large companies will be welcomed by manufacturing, engineering, pharmaceutical and technology companies amongst others. It will provide an additional £1.1bn of relief over the next five years and companies with tax losses will now be able to access cash payments (net of tax) for the first time.

“In the prior scheme the benefit was recorded as a reduction in taxes, now the new expenditure credit can be accounted for in operating profits. This will have a positive impact on the behaviour of R&D budget holders as they will now see a reduction in the overall cost of R&D. This supports the government’s policy of promoting the UK as one of the most attractive places in the world for innovative investment.

“Although the initial proposals detailed in the draft legislation were largely well received, we are glad to see changes in the Finance Bill which address concerns raised during the consultation process. The extension to the PAYE / NIC cap (an anti-avoidance measure) on payable credits has been confirmed. The extension will mean that genuine claims by companies which incur a high proportion of externally provided workers (such as in the software industry) or consumable items (typically manufacturers) are less likely to have their claims unfairly restricted.

“Overall we believe the new R&D expenditure credit is a step in the right direction.”


Notes to editors
The new R&D expenditure credit is calculated as 10% of qualifying expenditure.

Companies engaged in activity which meets the definition of research and development (R&D) for tax purposes are entitled to relief in respect of the associated expenditure. The definition of R&D covers a wide scope of activity (including the development of new products, processes, materials and devices) from a broad range of innovative industries (including life sciences, manufacturing, aerospace and defence, electronics and software).

Relief is provided under one of two scheme’s depending on the size of the claimant company:

  • Small to medium sized enterprise (SME) scheme: Broadly, those with fewer than 500 employees;
  • Large company scheme: Less generous than the SME scheme and broadly applicable to companies with more than 500 employees

The measures included in FB 2013 relate exclusively to the large company scheme and bring about changes to the scheme the objectives of which are to:

  • Make the relief more visible to R&D investment holders thereby better incentivising innovative activity;
  • Increase certainty and provide greater financial and cash flow support even to companies with no tax liability (because for example they are not profitable or have losses from previous tax years).

About Deloitte
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities.

Please see for a detailed description of the legal structure of DTTL and its member firms.

The information contained in this press release is correct at the time of going to press.

Member of Deloitte Touche Tohmatsu Limited.





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Laura Parsons
Deloitte LLP
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+44 (0) 20 7303 0885

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