A surprise tax measure in the pre-budget report means now could be the time for innovation-focused Midlands SMEs to start reinvesting in research and development, according to experts.
The report saw a surprise relaxation in the qualification rules allowing SMEs to claim relief for R&D activity regardless of whether they hold the relevant intellectual property rights.
This move is expected to increase take up of the popular relief in the coming year.
Historically R&D tax relief is an area that has assisted many Midlands businesses to minimise their tax liability.
Furthermore, under additional new rules due to come into force in 2013, where R&D leads to patent applications, a new, lower rate of corporation tax rate will apply to income derived from the patented inventions.
It adds up to encouraging news for SMEs in the region considering reinvesting in or stepping up R&D, according to Chris Romans, partner at PricewaterhouseCoopers in the Midlands.
He added: “Understandably expenditure on research and development hasn’t been the major focus of Midlands businesses as they look to cope with the rigours of the downturn.
“However if encouraging news on the health of the economy continues to emerge, their thoughts will increasingly be turning to growth strategies for the longer term.
“Taking advantage of this attractive and more flexible R&D tax regime is one way that Midlands SMEs can look to stay ahead of the competition.
“Given the proud heritage of innovation across the Midlands, we could yet see some new household names emerging from the current downturn as was the case in the recession of the 1990s,” he added.