The latest changes to R&D tax credits

R&D tax credits

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Xeinadin Group

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In an effort to boost productivity growth, the Government has set a target to raise investment in Research & Development (R&D) to 2.4% of UK GDP by 2027. The Chancellor Jeremy Hunt, emphasised that the Spring 2023 budget was focused on growth. Encouraging more R&D projects is key to this goal and a number of key changes were announced to the current R&D tax relief scheme in order to support innovation.

One of the headline announcements was a cut in the enhancement rate from 130% to 86% and the tax credit rate is being reduced from 14.5 % to 10%. The RDEC scheme will see an increase from 13% to 20%. Many of these changes are in response to the reports of abuse and fraud of the R&D SME scheme and the need to focus the R&D tax relief scheme on being more attractive to larger businesses and reducing the relief for SME’s. The two schemes may be merged into one in the future.

Data licences and cloud computing services will now be listed as two new expenditure categories. The planned inclusion of international R&D expenditure will now be delayed until 1 April 2024. There will also be a new credit will be available to loss-making SME’s where the R&D expenditure is at least 40% of total spend. 

A new digital form is being implemented from within 6 months of the end of the accounting period in which the expenditure is incurred. This will enable HMRC to carry out more upfront compliance checks.

Jon Goodier, R&D Director said “It’s good to see that the Government recognises the importance of rewarding innovation in the UK. The two new expenditure categories are very welcomed as this will provide more support to newly developed industries.”

Speak to an expert

If you need support with anything R&D tax related, then get in touch with the Xeinadin R&D team and we’ll start working with you straight away. Our aim to help you through the entire process and ensure you are maximising the amount of R&D tax credit that you can claim. 

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