R&D in the Autumn Statement

This afternoon, the chancellor outlined the latest budget in his attempts to tackle the economic uncertainty and turbulent forecasts.

The key headline for us was the focus on R&D tax credits and how the government are looking towards curbing the abuse and fraud reported in the scheme over the past few years.

The following changes have been made; “For expenditure on or after 1 April 2023, the Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20%, the small and medium-sized enterprises (SME) additional deduction will decrease from 130% to 86%, and the SME credit rate will decrease from 14.5% to 10%.”

In short, the changes are a step towards a more simplified, single scheme for all and further consultation on support for R&D intensive SMEs that does not impact significant changes to overall costs of the scheme.

Loss making SMEs will be able to claim only 18.9% of qualifying expenditure, down from 33%. Profit making SMEs that receive either corporation tax refunds or reductions will have this benefit reduced by 33% to a total relief of 86% of qualifying expenditure. RDEC qualifying companies (500+ employees) will receive an enhanced net credit of 15% up from 10.5%. It was also reiterated that claims under the SME scheme are aimed to be processed within 28 days of receipt (temporarily increased to 40 days). Whilst RDEC claims have no target and tend to take longer to process.

However, the above changes to the scheme do not indicate any further improvements on irradicating fraudulent claims that have put pressure on the integrity of the scheme in general. We hope that in the coming months, further improvements are made to the processing procedures at HMRC which will discourage those that are being fraudulent, reducing the backlog and continuing to reward those companies that are legitimately working to overcome technological and scientific uncertainties.

Even with the reduced rates, we would still encourage companies to look into their eligibility for a claim with a no obligation, free consultation with one of our experts. Get in touch and book your call here.