UK tech firms could lose R&D tax relief


UK tech firms could lose R&D tax relief

Warwick Ashford

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.

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.

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