BILLIONS of dollars in tax breaks for research and development by big business face being cut under an option being considered by a high-powered panel looking to plug holes in the business tax system.

The move is being eyed to help fund Treasurer Wayne Swan's plans to offer tax relief for loss-making small businesses in this year's budget, and he has appointed a business tax working group to advise on savings that could pay for the changes.

Treasurer Wayne Swan. Credit:Penny Bradfield

With some of the nation's biggest companies receiving millions in research tax breaks, cutting large firms' access to the R&D tax incentive has emerged as an option that would help deliver the hefty budget savings needed.

Under the scheme, companies with turnover of more than $20 million a year receive a 40 per cent tax offset on research and development spending.