Guidance on changes to R&D SME tax relief, which will be legislated in Finance Bill 2021.


Alongside the Finance Bill we have the draft legislation for the R&D SME scheme PAYE/ NIC cap. The design of the PAYE cap will include the following features:

  • a company making a small claim for payable credit below £20,000 will not be affected by the cap
  • a company will be able to include related party PAYE and NIC liabilities attributable to the R&D project when calculating the cap and these will be subject to the 300% multiplier
  • a company’s claim, of any size, will be uncapped if it meets two tests. These tests require that a company’s employees are creating, preparing to create or actively managing intellectual property (IP) and that its expenditure on work subcontracted to, or externally provided workers provided by, a related party is less than 15% of its overall R&D expenditure.


The changes to R&D SME tax relief will be legislated in Finance Bill 2021 and will have effect for accounting periods beginning on or after 1 April 2021. The government welcomes comments on the draft legislation by 7 January.

This article has been shared from ACCA In Practice, to whom copyright belongs.  Whitefield Tax are an ACCA Member Firm