The government has announced major changes to R&D relief to apply from 1 April 2023. The following is an extract from the HM Treasury document CP751, entitled Autumn Statement 2022 (para. 5.52), with paragraph spacing added for greater clarity:
“For expenditure on or after 1 April 2023, the Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20%, the small and medium-sized enterprises (SME) additional deduction will decrease from 130% to 86%, and the SME credit rate will decrease from 14.5% to 10%.
These rate changes will be legislated for in the Autumn Finance Bill 2022.
This reform ensures that taxpayer support is as effective as possible, improves the competitiveness of the RDEC scheme, and is a step towards a simplified, single RDEC-like scheme for all.
The government will consult on the design of a single scheme, and ahead of Budget work with industry to understand whether further support is necessary for R&D intensive SMEs, without significant change to the overall cost envelope for supporting R&D.
As previously announced at Autumn Budget 2021, the R&D tax reliefs will be reformed by expanding qualifying expenditure to include data and cloud costs, refocusing support towards innovation in the UK, and targetting abuse and improving compliance.
These changes will be legislated for in Spring Finance Bill 2023.”
See also our related story about the CIOT’s concerns over these changes.
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.