George Osborne has today presented his 2014 budget. And there is positive news for SMEs who carry out R&D as well as a variety of the creative industries.

R&D tax credits for SMEs

The scheme is going to be enhanced for the benefit of loss making SMEs who conduct research and development (R&D). The government will increase the rate of cash credits available to loss-making companies from 11% to 14.5% from April 2014. This change effectively means that some loss making businesses will now be able to recover as much as 32.625% of their R&D expenditure. This boost will provide welcome cash-flow to these innovative companies. More background detail on this announcement can be found here.

Film tax relief

Film tax relief is the most established of the creative industry tax reliefs having been around since 2007. From April 2014 the government will make tax relief available at 25% on the first £20 million of qualifying production costs and 20% on the rest. This applies to large and small budget films. In addition to this, the minimum UK expenditure requirement will be reduced from 25% to 10% and the cultural test will also receive a facelift.

Video games tax relief and high-end television production tax relief

Not much to report here but some of the detail of this scheme has been tweaked. It is worth noting that at this stage the video games tax relief is still awaiting state aid clearance from The EU.

Theatre tax relief

This is new and a welcome addition to the suite of creative industry tax reliefs. This scheme will offer 25% tax relief for qualifying touring productions and 20% for other qualifying productions. The scheme will come into effect from 1 September 2014.

Other announcements affecting innovation

The government announced funding for the Alan Turing Institute and its Catapult Centres. The Alan Turing Institute which is a national institute to help the UK lead in big data science will receive £42 million over 5 years. Meanwhile, the Cell Therapy Manufacturing, and Graphene Innovation Catapult Centres will get £74 million over 5 years.

ForrestBrown’s thoughts

We are pleased with the Chancellor’s latest measures aimed at promoting innovation and creativity in the UK economy. It helps to consolidate what we see as a ‘good and improving’ outlook in these sectors. There is still work to be done however, as shown by the Office for National Statistics latest report which showed R&D activity down in the UK in 2012 compared to 2011. The report also highlighted that the UK is also lagging many of its European counterparts when it comes to money invested in Research and Development.

If you’d like to discuss R&D tax relief and find out if your business is eligible for this benefit, give us a call and talk to one of our friendly tax team.

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