The Chancellor has announced a new R&D scheme for 20,000 SMEs in the UK coming in from 1 April 2023 and worth around £500 million per year.
This scheme is in addition to the changes announced in the Autumn Statement 2022 and enacted in Finance Act 2023 that also come into effect on 1 April 2023.
The details of the scheme per the HMRC’s policy paper Spring Budget 2023 Media Factsheet: Cutting & Simplifying Tax for Businesses to Invest and Grow are:
- “At Spring Budget 2023, the Chancellor announced a new R&D scheme for 20,000 SMEs in the UK – coming in from 1 April 2023 and worth around £500 million per year.
- These changes are a key part of the Chancellor’s plan to get the economy growing and make the UK the best place in the world to start and grow a business by promoting the conditions for enterprise to succeed.
- At Autumn Statement 2022, as part of the review into the R&D tax reliefs, the Chancellor committed to considering the case for further support for R&D intensive SMEs. Following engagement with industry, the Chancellor is now acting to provide that support.
- The scheme is targeted specifically at loss making R&D intensive SMEs. Focusing support towards those most impacted by the rate changes introduced at Autumn Statement 2022.
- A company is considered R&D intensive where its qualifying R&D expenditure is worth 40% or more of its total expenditure.
- Eligible loss-making companies will be able to claim £27 from HMRC for every £100 of R&D investment, instead of £18.60 for non R&D intensive loss makers.
- Around 1,000 claiming companies will come from the pharmaceutical and life sciences industry. This will support the development of life saving medicines.
- Around 4,000 digital SMEs will be from the computer programming, consultancy, and related activities sector. This will support the development of AI, machine learning and other digital based technologies.
- Around 3,000 other manufacturing firms, and another 3,000 professional, scientific, and technical activities firms will also qualify for the enhanced support.
- This builds on previously announced changes to support modern research methods by expanding the scope of qualifying expenditure for R&D reliefs to include data & cloud computing costs.
- The permanent increase from 13% to 20% for the R&D Expenditure Credit rate announced at Autumn Statement 2022 also means the UK now has the joint highest uncapped headline rate of tax relief in the G7 for large companies.
- Combining the government’s spending on R&D with the support from tax reliefs, total UK R&D support as a proportion of GDP is forecast to increase to approximately 1.0% in 2024/25, up from approximately 0.9% in 2019. The latest 2019 OECD average is 0.7% of GDP.”
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This title explains how the scope of R&D relief is wider than is often imagined, whilst also showing the statutory conditions that must be met for a successful claim.
