Recently, the Government has made several changes to the research and development (R&D) tax credit system.

As a company looking to make advancements in your field, R&D credits can be a welcome way to lower your tax bill. So it’s important to stay informed of all the latest developments and how they could affect your claim.

Here’s everything you need to know about the current state of the R&D scheme.

Main scheme reforms

During his Autumn Statement speech in November 2022, Chancellor Jeremy Hunt announced that the development expenditure credit (RDEC) scheme would become more generous for companies, increasing the rate from 13% to 20%.

In the same speech, Hunt also announced that the Government would cut the SME scheme with the payable tax credit for loss-making companies dropping from 14.5% to 10%. Not only that, but the enhanced deduction rate for SMEs would also decrease from 130% to 86%.

But, as of March’s Spring Budget, there have been further changes to the relief rates for SMEs.

The Chancellor kept the SME credit rate at 14.5% for loss-making companies. To be eligible, a company must spend 40% of its time on R&D-led work.

Companies, either through the RDEC or SME scheme, can now claim back for further activities such as:

  • data licensing
  • cloud computing
  • mathematical advances.

Changes for subcontractors

As of the start of this tax year, the criteria for subcontracted work has shifted, meaning certain works will no longer be claimable under the R&D schemes.

From now on, the focus has shifted towards promoting R&D work carried out in the country. The only time subcontractor work carried out overseas is eligible will be if the company cannot replicate the conditions for carrying out the work in the UK.

For example, if you’ve been undertaking research in an Arctic facility, it’s unlikely you’ll be doing so in the UK.

Providing further detail

Reporting requirements for R&D claims have now been expanded in a bid to cut down fraudulent activity.

HMRC will require pre-notification for first-time claims or if a company hasn’t filed a claim in the last three accounting years. Furthermore, you’ll need to provide contact information for an R&D representative from the company.

Claimants must provide additional details to HMRC, including:

  • the total R&D project costs
  • how many workers were part of the project
  • details of the R&D agent.

Relief claims must be approved by a named officer of the company.

Make the most of the scheme

If you’re looking to further industry knowledge in your field or make the next big discovery, the R&D scheme can be a welcome relief. Regardless of whether you’re loss-making or a roaring success, you could benefit from making a claim.

Get in touch to discuss your R&D tax credits.

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