Open consultation

Preventing abuse of the R&D tax relief for SMEs: second consultation


Budget 2020 announced the R&D PAYE cap, proposed in 2018, would be delayed by a year to allow time to consult on policy changes, which better focus the measure.

This consultation closes at

Consultation description

This consultation was published on 19 March 2020. It was due to close on 28 May 2020. We are grateful for the responses we have already received. The government recognises that many sectors with an interest in this policy are affected by COVID-19. We want to give all stakeholders time to submit their views so we have extended the consultation. The closing date is now 28 August 2020. However, we encourage early responses from stakeholders where possible to support our ongoing consideration of this policy.

Research and Development (R&D) tax reliefs, including the small or medium sized enterprise (SME) scheme, support businesses to invest and are a core part of the government’s support for innovation. To prevent abuse of the SME scheme, Budget 2018 announced that the amount of payable tax credit a qualifying loss-making business can receive would be capped at three times the company’s total PAYE and NICs liability for that year.

The government consulted on the application of the cap between 28 March and 24 May 2019, to ensure eligible businesses are able to access the relief. The government has published a response to the 2019 consultation here.

Budget 2020 announced the introduction of the cap would be delayed until 1 April 2021, in order to consult on changes to the design of the measure. The government welcomes responses and input from businesses and their representatives currently claiming or planning to claim the payable tax credit. The government would be particularly interested to hear from businesses who believe they would have been affected by the PAYE cap, as announced at Budget 2018, and who took part in the 2019 consultation.


Published 19 March 2020
Last updated 10 June 2020 + show all updates
  1. Updated consultation closing date.

  2. Updated with new consultation closing deadline.

  3. First published.