Last week the government released a consultation on preventative measures to reduce the abuse of R&D tax relief for SMEs. The R&D tax credits are not the most well-known or understood tax relief for businesses and there has been significant abuse of the system from businesses claiming tax relief they are not entitled to. There are also a lot of businesses missing out on this relief too.

This consultation is looking for feedback on how a cap will be applied to loss-making businesses claims. The government hopes to minimise the impact on businesses with genuine claims but there will be significant changes that may result in additional administration for those businesses affected.

Who will be impacted?

The changes will only impact those businesses that are SMEs who are loss-making. This impact will be on the amount they can claim as a cap is being imposed on their claims.

What are the proposed changes?

Currently, loss-making businesses can surrender some of their losses for R&D in return for a payment of R&D tax credit which can equate to 14.5% of the loss surrendered. Under the changes, there will be a cap imposed on the amount a loss-making business can claim. This cap will be set at three times the company’s PAYE and NICs liability per year.

This cap will result in an additional administrative burden on businesses, therefore the government is proposing that there will be a threshold introduced so that smaller claims will not be adversely affected. To prevent abuse from businesses that are part of a group from making multiple claims below the threshold, they will be limited to one claim below the threshold per period.

The cap only applies to losses surrendered and it is possible to carry unused losses forward to the next period.

How will the cap be calculated?

The cap will be set at three times the company’s PAYE and NICs liability per year. However, you may be able to maximise this through using some of PAYE and NICs from other parts of your company’s group, subcontractors or connect parties.

Will there be any exceptions?

The government acknowledges that not all businesses will fit this model and there will be genuine claims from businesses that have a higher proportion of R&D spend against their PAYE and NICs liability. In such cases, they are trying to refine the application so that businesses of this nature are not unfairly penalised.


The consultation was released on 28 March 2019 and it closes on 24 May 2019. The changes will be implemented from April 2020.

Will it be worth the hassle?

Yes. There will still be significant tax relief that can be achieved from making a claim, it will just mean a bit more work. However, that is where we can help you as we can remove this burden by doing the work for you.

What can TEQ Group do to help?

One of our key services is helping businesses to discover what R&D tax relief they can claim for and often we find greater levels of relief than businesses or their accountants expect. We are experts in this field and understand all the rules and we have a 100% success rate with our claims. We are so confident in our abilities we won’t invoice you until you receive your payment. Our initial consultation is also free.

To see whether you are eligible for R&D tax relief contact TEQ Group today on 01423 815299 or click the button below and we’ll be happy to offer some advice.


Contact TEQ Group