21 December 2023

Since Jeremy Hunt took over as Chancellor in October 2022, there have been a number of changes to the Government’s research and development (R&D) tax credits scheme.

First introduced in 2000, this forward-looking tax incentive can help fund science or technology-based project work seeking growth in scientific and/or technological know-how.

We’ve simplified the many changes in the table above, and for more information, keep reading.

expenditure incurred on or after 1 april 2023

  • Rate reforms to the SME and RDEC schemes relief for companies claiming from the SME tax relief decreased. The 130% SME R&D enhancement rate fell from 130% to 86%, and the SME tax credit rate decreased from 14.5% to 10%. Meanwhile, there was an increase in the RDEC rate, from 13% to 20% (subject to 25% Corporation Tax).
  • Enhanced support for R&D intensives – in the Spring Budget, the government announced a higher rate of relief for R&D-intensive SMEs. This is for companies with qualifying R&D expenditure that’s at least 40% of its total expenditure. From 1 April 2023, these SMEs became able to claim a higher payable R&D tax credit rate of 14.5, rather than the reduced 10%.
  • Seeking an advance in ‘pure maths’ can be considered as R&D – the guidelines on the meaning of R&D for tax purposes were amended to include pure mathematics in the definition of qualifying activities.

accounting periods beginning on or after 1 april 2023

  • Data and cloud costs can be claimed – cloud computing services and data count as qualifying expenditure for both RDEC and SME.
  • Requirement to pre-notify – companies must tell HMRC of their intention to file a claim at any point from the start of the accounting period, to six months after the end of the period to which the claim relates.

claims submitted on or after 8 august 2023

  • Requirement to supply Additional Information Form (AIF) – an AIF is required for every R&D claim made on a tax return, even if it’s a second or later-year claim for the same project.

from 22 november 2023

  • No new assignments of R&D tax credits – funds must be remitted to claimants and can’t be transferred to other individuals or companies, including R&D tax agents.

claims submitted on or after 1 april 2024

  • Nominations disregarded – HMRC will withhold payments until it can make them directly to the claimant for all claims to payable R&D tax credits.

accounting periods beginning on or after 1 april 2024

  • SME/RDEC scheme cease the existing two R&D schemes will end.
  • Merged scheme begins – the new scheme simplifies process, with aligned qualifying rules and a more visible above-the-line credit.
  • Overseas restrictions apply – subcontracted R&D work and the cost of externally provided workers will be limited to work in the UK, with some exemptions classified as qualifying overseas expenditure.
  • R&D intensive threshold reduced to 30% from 40% – a reduction in the percentage of total expenditure as a threshold for qualifying.
  • One-year grace period for R&D intensive scheme if dip below 30% threshold companies that go under the 30% qualifying R&D expenditure will still receive relief for one year.
  • New rules looking to place relief in the hands of R&D initiator in subcontracting arrangements – e.g. if a company contracts out qualifying activities to a research organisation, the business can claim for the contract costs.

The R&D tax credits landscape has undergone many changes since Hunt became chancellor, but this guide should make them clearer. If you’re still unsure, don’t hesitate to get in touch by email or phone 0116 490 0279 today.