Complete 6 pages APA formatted article: Business Taxation. See uploaded guidlines. ??Research and development (R&D) tax credits are a company tax relief which can either reduce a company’s tax bill or, for some small or medium sized companies, provide a cash sum’. Through a different definition it is noticed that ‘Research and development tax credits are a company tax relief which can either reduce a company’s tax bill or, for some small or medium sized companies, provide a cash sum. the R&D tax credit works by allowing companies to deduct up to 150% of qualifying expenditure on R&D activities when calculating their profit for tax purposes’ (The Small Business Portal, 2006). It should be noticed that the above scheme can lead to the benefits stated above only if specific terms and requirements are met (as it will be explained below).
The benefits offered by this scheme to firms across the country can be differentiated. Specifically for small businesses it is noticed by the UK HM Revenue and Customs that the particular scheme can lead to a reduction of the tax bill up to a percentage of 15%. On the other hand, it is also supported that ‘some SME companies not in profit can surrender their R&D tax losses for cash (in the form of a payable credit) of up to 24p per £1 of actual expenditure within specified categories’ (UK, HM Revenue and Customs, Small Businesses). The level of the benefit can reach up to a 100% of capital allowances for small firms that make a relevant capital expenditure.
In order to understand the benefits offered for small businesses in UK under the particular scheme it is necessary to refer primarily to the definition of R&D scheme at least regarding its general characteristics.