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.”
Related content from Claritax Books
The UK’s special tax rules for Research and Development expenditure continue to offer valuable tax relief for companies.
This book 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. The book is now being updated to reflect changes in the Autumn statement of November 2022 and the Budget of 15 March 2023, and the new edition will be available in the second quarter of 2023.