The UK Government has long encouraged businesses to invest in R&D projects, believing it to be at the forefront of economic growth.<\/p>\n\n\n\n\n\n\n\n
R&D tax reliefs are, therefore, lucrative and aimed at both Small and Medium Sized Enterprises (SMEs) and larger organisations.<\/p>\n\n\n\n
However, companies involved in R&D projects should be aware of the Government\u2019s recent reforms to the R&D tax reliefs, which came into force in April 2023.<\/p>\n\n\n\n
R&D tax relief for SMEs<\/strong><\/p>\n\n\n\n Up until 31 March 2023, the Government allowed profitable Small and Medium Enterprises (SMEs) working on R&D projects to deduct an extra 130 per cent of their qualifying costs from their yearly profit for Corporation Tax purposes.<\/p>\n\n\n\n This was on top of the regular 100 per cent deduction \u2013 allowing up to 230 per cent of qualifying expenditure to be offset against their costs.<\/p>\n\n\n\n However, as of 1 April 2023, this uplift was reduced to 86 per cent. This is on top of their normal 100 per cent deduction, so a total 186 per cent deduction can now be made.<\/p>\n\n\n\n SMEs are also able to claim a payable tax credit if the company has claimed relief and made a loss, the payable credit was worth up to 14.5 per cent of the surrenderable loss but is now 10 per cent.<\/p>\n\n\n\n R&D-intensive businesses (those whose R&D expenditure equates to 40 per cent or more of their total expenditure) still qualify for an enhanced rate of 14.5 per cent.<\/p>\n\n\n\n The Government defines an SME as a business with less than 500 staff and a turnover of under 100 million euros.<\/p>\n\n\n\n However, the R&D projects must be in the fields of science and technology.<\/p>\n\n\n\n R&D Expenditure Credit (RDEC)<\/strong><\/p>\n\n\n\n RDEC is a similar tax relief but is geared towards larger corporations, however, SMEs can claim RDEC if they cannot claim R&D tax relief for small and medium-sized enterprises.<\/p>\n\n\n\n As of 1 April 2023, companies can be offered credit worth 20 per cent of their qualifying R&D expenditure which is a rise from the 13 per cent rate offered previously.<\/p>\n\n\n\n The RDEC is taxable, but it can be used to offset the corporation tax bill, or claimed as a cash payment, providing significant financial relief for companies undertaking R&D.<\/p>\n\n\n\n The other R&D reforms<\/strong><\/p>\n\n\n\n In addition to the rate changes, the Government has introduced the following:<\/p>\n\n\n\n \u00b7 Advanced Assurance notification forms must be submitted digitally by SMEs to HM Revenue & Customs (HMRC) \u2013 mandatory from 1 August 2023<\/p>\n\n\n\n \u00b7 R&D expenditure categories extended to include costs of datasets and cloud computing<\/p>\n\n\n\n \u00b7 R&D in pure mathematics now qualifies for relief<\/p>\n\n\n\n For more information about R&D tax relief and how you can apply, please contact us.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"