The research and development tax credit initiative has been going through a number of, what seems like, ever-changing reform strategies lately, which can be hard to keep up with.
This page keeps track of all the R&D tax credit change announcements, with the latest schedule outlined below.
1. Enhanced R&D Intensive Rate
New support announced for R&D intensive loss-making SMEs (those who spend 40% or more of total outgoings on R&D) in the form of an enhanced rate of tax relief of £27 for every £100 of qualifying R&D spend. (Awaiting draft legislation to be published in the summer.)
2. Reduced Loss-Making SME Rate
Other loss-making SMEs conversion rate will be reduced from 14.5% to 10%.
3. Reduced SME Scheme Rate
SME’s scheme additional tax deduction rate will be reduced from 130% to 86%.
4. Increased Large Company Rate
RDEC scheme’s additional tax credit rate will increase from 13% to 20%.
1. Data & Cloud Computing Costs
Qualifying costs will include dataset licence payments, staffing data costs and cloud computing service costs used specifically for a R&D project.
2. Pre-Notification of Claim
New claimants and those who have not claimed within the last 3 years are required to inform the HMRC, within 6 months of their year-end, that they intend to submit an R&D tax credit claim.
3. Refocus on UK Innovation – Postponed
The Spring 2022 budget announcement of a refocus on UK-based innovation with a restriction of some overseas expenditure will now come into effect from 1st April 2024, instead of 1st April 2023.
The below additional information will be required for all claims made on or after 1st August 2023.
1. Claim Endorsement
Claims will have to be endorsed by a named senior officer within the claimant company.
2. Agent Details
Full details to be provided of the agent who advised the company on compiling the claim.
3. Cost Breakdown
A detailed cost breakdown per innovation project will be required across for the following categories:
Below is the historical announcements of the R&D tax credit reforms. Please note, the above is the latest schedule for the changes, but we cannot guarantee the Government won’t change their strategy for the initiative in a new, future announcement.
On the 17th of November, the Government delivered an Autumn Budget that had wide-ranging implications for many businesses. We explain the three key R&D tax credit changes that were announced and how they will affect innovative businesses R&D expenditure on or after 1st April 2023.
1. RDEC Rate Increase
The Research and Development Expenditure Credit (RDEC), which applies to large companies and SMEs, under certain circumstances (e.g. if they have particular grants or are subcontractors), will see a 50% rise in the relief they could receive, from 13% to 20%
2. SME Rate Decrease
Unfortunately, SMEs which have less than 500 employees and a turnover less than €100m or a balance sheet that totals less than €86m, will see a nearly 34% decrease in their relief as it drops from 130% to 86%.
3. SME Loss Surrendering Decrease
SMEs surrendering a loss will also see a decrease in the relief they can receive from 14.5% to 10%.
Earlier in 2022 the Government announced three, more positive reforms that would benefit UK based innovation and the R&D tax credit initiative, which will come into effect in April 2023.
1. Data & Cloud Computing Costs
Qualifying R&D project costs will include dataset licence payments, staffing data costs and cloud computing service costs.
2. Refocus on Innovation Based in the UK and Not Overseas
Third-party subcontractors and Externally provided workers (EPW) must carry out work in the UK and be on a UK payroll.
3. Tackling Abuse and Improving Compliance
The government is introducing a new cross-cutting team to tackle abuse and requiring more detailed claims to be submitted digitally.
19 Agriculture R&D Tax Credit Examples