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Budget Comment: Corporation tax: R&D tax credits: Universities and charities

Outline of the new measure

HMRC has recently received claims for Research and Development Expenditure Credits (RDEC) from universities. It was never the intention or the purpose of the legislation that universities or charities should or could access R&D tax relief. The 2013 introduction of RDEC provides large companies with an incentive to undertake R&D and receive the tax benefit regardless of their corporation tax liabilities. Universities undertaking research are funding separately through science resource funding.

To remove the scope for universities and charities to claim the relief the Government will introduce an amendment to S104A CTA 2009 which will describe that an ‘ineligible company’ (which will be defined as a ‘institution of higher education’ or a charity) will be unable to claim RDEC in respect of expenditure incurred on or after 1 August 2015.

Our view

Dominic Preston, Head of Innovation Tax, Grant Thornton UK LLP commented;

"I'm not surprised that the Treasury moved quickly to close this loophole in the RDEC legislation. Having said that the opportunity to claim RDEC for costs incurred to 31 July 2015 remains open for universities and charities alike and may present a useful tax benefit before the change in legislation. On a more positive note the planned reduction in corporation tax in 2017 to 19% and to 18% in 2020 increases the net tax benefit to RDEC claimants further improving the schemes benefits and incentives to innovative large companies."