Autumn Statement: R&D Relief

In the Autumn Statement on 17 November 2022, the Chancellor announced changes to the available R&D Tax Relief rates, in a move aimed at targeting abuse, increasing compliance and rebalancing the relief.

 There are two schemes for claiming relief, depending on the size of the company or organisation:

• The Small or Medium-sized Enterprise (SME) Scheme.
• The R&D Expenditure Credit (RDEC).

The Chancellor announced the following changes to the available rates for both schemes from 1 April 2023:

• The SME Scheme will have the additional deduction reduced from 130% to 86%. 
• The SME credit rate will reduce from 14.5% to 10%.For loss-making SMEs, this is a reduction in the benefit, from 33% to 18%.
• The RDEC rate will increase from 13% to 20%. Even with the increase in the Corporation tax rate to 25%, the net benefit still increases from 10.53% to 15%.

This rebalancing of the relief between the two schemes will be legislated for in the Autumn Finance Bill 2022. The objective is to achieve a simplified single scheme for all investors that is similar to the RDEC. The design of the scheme will be the subject of future consultation.

Previously announced additions to the types of qualifying expenditure, such as data and cloud costs have been confirmed and will be legislated for in the Spring Finance Bill 2023.

All of the proposed changes are part of a wider initiative of R&D Tax Relief reform, aimed at:

• Refocusing support towards UK innovation.
• Target abuse.
• Improve compliance.

Useful guides on this topic

R&D Tax Relief: Overview
What is R&D Relief? How does it work? Why does the size of the company matter? What is sub-contracted R&D? How do I write an R&D Report?

R&D Tax Relief reform
The government has published draft legislation as part of Finance Bill 2022-23, which sets out the planned reforms of the Research & Development (R&D) Tax Relief

External link

Autumn Statement 2022