Summer Budget 2015 changes to R&D tax credits

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George Osborne gave his first all-Tory Budget speech in 18 years last week and delivered few changes to the ultra-attractive R&D tax credits incentive that continues to go from strength to strength for clever UK companies.

There was just some tightening up in the rules aimed at Universities and charities to prevent them from claiming the RDEC with effect from 1 August 2015. This change gives effect to the intention of the RDEC to benefit companies in the private sector only which appears reasonable.

The decrease in the headline corporation tax rate to 19% in 2017 and to 18% by 2020 should provide further stimulus for more international companies to make the UK their home and potentially benefit from  the UK R&D tax incentive plus this reduced rate makes the RDEC even more attractive.

More broadly the changes to the taxation of dividends may indirectly benefit R&D claimant companies as founder shareholders will have less incentive to extract profits by way of dividends and may instead opt for higher salaries with the latter being a qualifying expense for R&D tax purposes.