We are sharing this update from ACCA, our professional body, for the interest of clients and contacts. The content is (c) ACCA

For expenditure incurred on or after 1 April 2023, Research and Development (R&D) tax reliefs will be changed as follows:

  • The small and medium-sized enterprises (SME) additional deduction will decrease from 130% to 86%.
  • The SME credit rate will decrease from 14.5% to 10%.
  • R&D expenditure credit rises from 13% to 20%.

These Autumn Statement 2022 rate changes will be legislated for in the Autumn Finance Bill 2022 as follows.

Part 3 Chapter 6A CTA 2009 R&D credit and to the Part 13 CTA 2009 R&D relief and credit:

  • The rate of relief for Research and Development Expenditure Credit at s104M(3) CTA 2009 will be increased from the current 13% to 20%.
  • The additional deduction for claims within the Small and Medium Sized Enterprise Scheme (s1044(8) CTA 2009) will be reduced from 130% to 86%.
  • The amount of tax credit at s1058(1) CTA 2009 is reduced from 14.5% to 10%.

This reform ensures that taxpayer support is as effective as possible, improves the competitiveness of the RDEC scheme, and is a step towards a simplified, single RDEC-like scheme for all.

The government will consult on the design of a single scheme and, ahead of the Budget, will work with industry to understand whether further support is necessary for R&D intensive SMEs, without significant change to the overall cost envelope for supporting R&D.

As previously announced at Autumn Budget 2021, the R&D tax reliefs will be reformed by expanding qualifying expenditure to include data and cloud costs, refocusing support towards innovation in the UK and targeting abuse and improving compliance. These changes will be legislated for in Spring Finance Bill 2023.