Rates for research and development tax credits are set to change from April 2023 as part of HMRC’s planned overhaul of the R&D tax relief system.
These changes were first announced as part of the Autumn Statement in November and will impact any expenditure under both tax credit schemes incurred after April 1, 2023.
Rates changing
There will be changes introduced to the rates for both the SMEs and RDEC schemes, with small and medium size businesses set to lose out with a significant drop in funding available.
Larger businesses claiming under the RDEC scheme are actually set to see an increase in the rates, however the impact of the changes to both rates vary depending on whether you are a profit or loss-making business.
Advisors across the country were expecting a reduction in the SME scheme, but not this much, and now any qualifying expenditure leading to a cash back claim particularly will be much less generous for innovative small and medium sized businesses.
The changes could cut the cash benefit from the scheme by more than 50 per cent and that is a very big cut for SMEs that are seeking to invest in research and development.
HMRC has now issued a consultation on trying to move to one scheme, which is set to ultimately look more like the RDEC scheme. This is traditionally the less generous scheme, but we will see what the results are of that consultation process.
