UK technology companies could soon lose tax deductions for research and development, according to business advisory firm Grant Thornton.
HM Revenue & Customs (HMRC) may change its interpretation of the rules which provide for "tax super-deductions" on costs incurred for R&D, Grant Thornton has warned.
By submitting your email address, you agree to receive emails regarding relevant topic offers from TechTarget and its partners. You can withdraw your consent at any time. Contact TechTarget at 275 Grove Street, Newton, MA.
The new interpretation of the rules may prohibit claims for any R&D costs which relate to products and services that are sold for use rather than scrapped.
Samantha Vanags, technology and R&D tax partner at Grant Thornton, said HMRC is increasing the number and toughness of challenges to these claims.
"This has led us to believe the [narrower] new interpretations will soon be made official," she said.
According to Vanags, the new interpretations will be particularly hard-hitting for many leading-edge technology and engineering companies already adversely affected by current economic conditions.
"Clamping down in this area goes directly against the original purpose of the relief, which was to stimulate R&D activity in the UK," she said.
Vanags said the move is "short-sighted" at a time when the UK's income from other sectors such as financial services has declined.