R&D Tax Reliefs Changes

Changes are coming for UK R&D Tax Reliefs after HMRC announced details of new measures that will take effect from April 2023.


*This article was originally published on 28th February and has been updated to reflect the changes from April 2023

Changes are coming for UK R&D Tax Reliefs after HMRC announced details of new measures that will take effect from 01 April 2023, some of which announced in the Spring Budget 2023. The changes are being implemented with the aim to increase UK-based innovation, extend the scope of qualifying expenditure, and tackle fraudulent claims.

To outline the changes, we have asked R&D Incentives Director, Tom Whitworth, to share his key takeaways from the new policies, and what they may mean for your business.

Rates due to change

Announced in both the Autumn Statement and Spring Budget, from 1 April 2023 there will be changes to the rates for both SME and RDEC regimes.

From 1st April 2023, SME relief will decrease from around 25% of every £1 of qualifying R&D expenditure to 21.75% for profitable businesses.

For loss-making SMEs they will be entitled to up to 18.6% for every £1 of qualifying R&D expenditure (down from up to 33%).

However, loss-making R&D intensive SMEs (that spend more than 40% of their total company expenditure on qualifying R&D expenditure), they will be entitled to relief of up to 27% for every £1 of qualifying R&D expenditure.

Meanwhile the RDEC rate will increase from 13% to 20% (or net 15%) per £1 of qualifying R&D expenditure.

Whilst some, less R&D intensive businesses may be disappointed to be losing out on a considerable amount of benefit with the adjusted rates, others will benefit overall, and both SME and RDEC reliefs look likely to continue to represent a sizeable incentive for innovative companies, providing them still with additional financial support for their development work and comprising a key pillar of the government’s total spending on R&D.

R&D goes digital – what you need to know

R&D relief can be claimed for the development of new or improved products, processes or software solutions.

From 1 August 2023,  R&D Tax Relief claims will have to be made digitally via an ‘Additional Information’ Form. This digital submission will have to include:

  • A technical description of what R&D activity the company has undertaken (per project)
  • A breakdown of qualifying R&D expenditure (per project)
  • Endorsement of the claim from a ‘senior officer’ within the business
  • Details of any agent that may have advised the company in making a claim

It’s important to consider…

Our R&D Incentives team strongly recommend that businesses which are not already providing a technical report to substantiate their R&D claims do so now. This will reduce the risk of a HMRC enquiry into your claim, but also pave the way for the upcoming legal requirement to provide this information from August 2023.

What’s new for R&D qualifying expenditure?

Other upcoming changes to R&D Tax Reliefs will also seek to support more modern methods of R&D and related expenditure. Whilst consumables and software were already included in the previous definition of qualifying expenditure, this has been extended to include cloud computing, storage and hosting, and datasets.

The definition of R&D will also get an update to include pure mathematics in the hope that it’ll grow sectors such as quantum computing, artificial intelligence and robotics.

Here for all your R&D questions

If you’d like to talk through your R&D Tax Reliefs needs or are looking to get some initial advice, please give our R&D Incentives team a call on 0114 698 6960.

We’d love to talk through how we can deliver great things, together.

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