Taxation logo taxation mission text

Since 1927 the leading authority on tax law, practice and administration

Research and development tax credit scheme PAYE cap

30 March 2021 / Nigel Holmes
Issue: 4786 / Categories: Comment & Analysis
Cap on relief

Key points

  • The research and development PAYE cap for small and medium-sized enterprises applies from 1 April.
  • Under the cap SMEs can claim R&D tax credits of up to £20 000 plus 300% of its PAYE and NI liability.
  • The previous PAYE cap was scrapped in 2012.
  • Some legitimate claims could be affected.

The amount that loss-making small and medium sized enterprises (SMEs) can claim in research and development (R&D) tax credits will be capped as part of changes originally slated for introduction last year.

The so-called PAYE cap is designed to prevent abuse of this valuable form of tax relief and comes into effect on 1 April. However there has been a last minute change to the commencement rules. In an email to R&D consultative committee members on Budget day HMRC indicated that the draft legislation will now not include a ‘straddle’ rule and the cap will...

If you or your firm subscribes to, please click the login box below:

If you are not a subscriber but are a registered user or have a free trial, please enter your details in the following boxes:

Alternatively, you can register free of charge to read a limited amount of subscriber content per month.
Once you have registered, you will receive an email directing you back to read this item in full.

Please reach out to customer services at +44 (0) 330 161 1234 or '' for further assistance.

back to top icon