R&D Tax reliefs – back in the spotlight after the Autumn Statement

Our recent article on R&D changes highlighted the ongoing shifting sands, so here are the latest developments announced in the Chancellor’s Autumn Statement that will take effect from 1 April 2023

RDEC changes – The Good

The RDEC above the line tax credit rate is increasing from 13% to 20%, resulting in a rise in net benefit from 10.53% to 15%.

SME changes – The Bad

SMEs currently obtain tax relief on 130% of R&D costs. This will fall to 86%, reducing the effective cash benefit from 24.7% to 21.5%.

Additionally, loss making SMEs can surrender losses for a cash R&D tax credit (RDTC). 

The tax credit will fall from 14.5% to 10%. 

For example, under the existing rules, a SME spending £100,000 on R&D can surrender a maximum £230,000 for a 14.5% tax credit of £33,350, providing a 33% net benefit on the original R&D spend.

This cash benefit will fall significantly to £18,600 under the new rules (a 19% net benefit).

Error and fraud – The Ugly

Targeted fraud by organised crime groups is a continuing concern for HMRC.

A simpler future?

As well as tackling fraud in the SME claim process, the changes announced align with the Government’s intention to open a consultation on the design of a simplified, single RDEC focused scheme for all businesses.

Further changes to R&D incentives are expected in the near future, so please keep an eye on our social feeds.

These changes are scheduled to take effect from April 2023, so there is time to plan with your expert Dafferns R&D tax team – please do get in touch with any questions.