Chancellor Jeremy Hunt announced several changes to R&D tax relief in the Autumn Budget, including changes to the rates paid by the Research and Development Expenditure Credit (RDEC) for larger firms and the small and medium enterprises (SME) R&D relief scheme.
From 1 April, the RDEC rate will increase to 20% from 13%. Meanwhile, the SME deduction rate on qualifying expenditure will be reduced to 86% from 130%, and the SME credit rate decreased to 10% from 14.5%.
New eligibility criteria will also be introduced from 1 April 2023, including the exclusion of subcontracted R&D expenditure from outside the UK from R&D claims to incentivise companies to move operations into the UK. Additionally, cloud-based computing costs such as AWS will be eligible for inclusion in R&D claims from April 2023. The aim of these changes is to incentivise more R&D activity in the UK.
Other changes in April include:
From 1 April 2023, new rules for R&D Tax Relief claims will also require businesses to submit a pre-notification of their claim to HMRC digitally.
This applies if a business is a new claimant or has not claimed in the last three financial periods.
The requirement to pre-notify HMRC will affect any business that conducts research and development if they are eligible to claim under either the R&D Expenditure Credit (RDEC) or the SME R&D relief schemes.
