After months of pressure, Chancellor Jeremy Hunt announced a partial reversal to the SME Research & Development (R&D) tax credit cuts in the recent Spring Budget.
Startups had warned that the cuts announced in the last Autumn Statement would hinder growth for early-stage and research-intensive tech companies.
The R&D tax credits and relief scheme was already attracting criticism because of suspected fraud and abuse of the initiative.
The autumn reforms to the R&D scheme became effective in April 2023.
The key points are:
- the reduction of R&D costs from 230% to 186% of qualifying expenditure.
- The available cash credit rate for R&D tax losses offset against a cash rebate is reduced to 10% from 14.5%.
The Research and Development Expenditure Credit (RDEC) rate has increased from 13% to 20%.
Top up R&D
The previously announced reduction will remain in place, but loss-making “R&D-intensive” startups will receive a top-up. Those that spend 40% or more of their total outgoings on R&D can claim a tax credit of 27%, or £27 for every £100 spent.
The inclusion of some overseas expenditure in R&D tax relief claims is deferred for a year until 1 April 2024 to allow the Government to consider the interaction with a potential merged R&D relief scheme.
We have two new categories of qualifying R&D expenditure for data licences and cloud computing services.
From 1 August 2023, all R&D claims must be filed using the new digital forms, regardless of the accounting period concerned.
How to claim R&D relief
You can claim the relief up to two years after the accounting period it relates to by treating it as a deduction from the company’s profits for the accounting period.
You can make your claim on your company tax return or via an amendment.
You must send:
- A full Company Tax Return form (CT600)
- A completed tax computation
- Add the form CT600L, if claiming a payable tax credit or Research and Development Expenditure Credit.
Need help with claiming Research & Development tax credits scheme? Contact us today.
