29th November 2022

The government’s Autumn Statement revealed a number of upcoming changes to the R&D Tax Credit scheme. The key changes that were announced by the Chancellor included:

• All R&D claims will need to be submitted digitally to HMRC.
• The current SME relief uplift of 130% will decrease to 86%.
• The tax credit refund rate will be reduced from 14.5% to 10%.
• The RDEC scheme rate (larger companies) is going up from 13% to 20%.
• Overseas sub-contracting costs will not be allowed as qualifying expenditure.

Changes to the SME scheme were made largely in response to reports of abuse and fraud that have recently surfaced. The changes are expected to become effective for financial years commencing from April 2023.

In addition to these changes, the Chancellor said that, ahead of the next Budget, the government will work with industry to understand what further support R&D intensive SMEs may require. Earlier this year, in the spring statement, the government pledged an increase in R&D funding to £20bn by 2024/5.

Garry Hague, Managing Director of R and D Tax Specialists, commented: “It is obviously disappointing that alleged abuse of the scheme by a small minority has resulted in these changes to what is a very successful business support scheme.  In the short term, the changes will not affect any current claims, and will likely only come into play for financial periods occurring after 1^st April 2023.

“Whilst there will be a reduction in the size of claims following these changes, the scheme will continue to provide essential funding to businesses engaged in R&D work, and we implore companies to continue to claim.  At the same time, with HMRC’s focus on eliminating fraud in the scheme, we  encourage companies to partner with a bona fide specialist in the R&D Tax Credit scheme to ensure claims made are fully compliant with HMRC’s requirements and the law.

“With more than 10 years’ experience in the scheme, R and D Tax Specialists are happy to provide a no obligation assessment of a company’s validity to claim and we provide a complete end-to-end service for preparation and submission of claims.”