Exciting news for UK companies! The Chancellor's budget statement earlier today introduced some changes to the R&D Tax Credits scheme, in line with the Finance Bill 2023.
RD Tax Group's opinion is that these changes are definitely a step in the right direction.
Starting from April 2024, the current R&D Expenditure Credit (RDEC) and SME schemes will be merged, simplifying the system and providing greater support for UK companies to drive innovation.
Loss-making companies will be taxed at a reduced rate of 19%, which equates to 16.2p per £1 of qualifying expenditure. Profitable companies will receive an above-the-line credit worth between 15% and 16.2% after tax, while the R&D-intensive scheme for loss-making SMEs remains standing.
Additionally, the intensity threshold in the R&D intensives scheme will be reduced from 40% to 30% for accounting periods that start on or after 1 April 2024, allowing around an additional 5,000 SMEs to qualify for the enhanced 27% rate of relief.
A one-year grace period will also be introduced, providing certainty for companies that they will continue to receive relief for one year if they dip under the 30% threshold.
These changes will provide an additional £280 million of relief per year by 2028-29 to drive innovation in the UK. The government is also increasing HMRC funding by £5 billion, which we hope means a much-needed improved process in compliance checks.
If you're currently facing scrutiny from HMRC regarding your R&D Tax Relief claim or would simply like advice on how these changes may affect your claim, feel free to get in touch for an informal chat.