R&D Tax Relief Reformation 2023
Research and Development (R&D) Tax Relief is set to undergo Reformation in 2023, following the review of R&D tax reliefs launched at Budget 2021. The government announced changes to the reliefs at Autumn Statement 2021 to incentivise R&D using modern computational approaches, tackling abuse, improving compliance and extending the scope of qualifying expenditures.
- Legislation will be included in the Spring Finance Bill 2023 to extend the scope of qualifying expenditures to include the costs of datasets and of cloud computing. This will apply to accounting periods beginning on or after the 1st of April 2023.
- Legislation will also be included to tackle abuse of reliefs. Companies will need to inform HMRC, in advance, that they plan to make a claim. This will apply to accounting periods beginning on or after the 1st of April 2023.
- From the 1st of August 2023: all claims to the R&D reliefs will have to be accompanied by a compulsory Additional Information Form, providing HMRC with more detail of the claim.
These changes will affect companies that carry out Research and Development and claim R&D tax relief under either of two schemes – the Research and Development Expenditure Credit (RDEC) and the small or medium enterprises (SMEs) R&D relief, and some companies which have made a Patent Box election.
R&D tax reliefs have a key role in incentivising R&D investment by reducing the costs of innovation. It is therefore important to ensure that the reliefs remain up-to-date, competitive and well-targeted. Following the review of R&D tax reliefs launched at Budget 2021, the government announced the following measures, which will generally apply for accounting periods beginning on or after the 1st of April 2023:
The Numbers
Coinciding with the increase in the Corporation Tax rate, here are the changes to expenditure on or after 1 April 2023:
- The RDEC rate increases from 13% to 20%.
- The SME additional deduction will decrease from 130% to 86%.
- The SME credit rate will decrease from 14.5% to 10%.
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