Jack Bennett Tax Consultant

From the 1st April 2023, there will be some changes relating to the Research and Development Tax reliefs. R&D tax reliefs are a government incentive designed to encourage UK-based companies to invest in innovation. Work that advances overall knowledge or capability in a field of science or technology, and projects and activities that help resolve scientific or technological uncertainties, may qualify for R&D tax relief. 

Jeremy Hunt announced that it would be a huge mistake to cut the government's research and development budget. However, there has been significant reform to the R&D tax-credit schemes, both SME and RDEC. The SME Enhanced Deduction for R&D is more commonly used for our clients, and from April 1st this relief will decrease from 130% down to 86%. These reforms continue to tackle suspected abuse of the current reliefs, as well as indicating the first step towards what Jeremy Hunt has called a simplified, single RDEC- like scheme.

What are the changes?

There are various changes currently included in draft legislation, which are expected to come into effect in the coming months. These include the following –

  • For those who have not made claims in the past three years or if they are a first-time claimant, the company will need to notify HMRC that they are making a claim within 6 months of the end of the financial period. If the claim is actually submitted to HMRC during this period, however, no notification will be required. 
  • All claims will have to be submitted in a more standardised format, ensuring that claimants are disclosing key mandatory information in relation to the claim being made. This includes a sign-off procedure, whereby all claims are authorised by a ‘Main Internal R&D Contact’. 
  • Some cloud storage and data costs will become qualifying cost types. 
  • For overseas costs relating to externally provided workers or subcontractors, it is likely that these will no longer qualify for the R&D relief. 

The Government is aiming to tackle abuse of the R&D tax relief system, whilst continuing to encourage genuine R&D efforts within the UK.

If you’ve been undertaking R&D activities for a while but never claimed for relief, it is worth remembering that you may be able to backdate a claim for previous financial periods. Always remember, the key to a quality R&D tax reclaim is detailed and accurate records of any time and costs associated with an R&D project.

To establish whether what you are doing qualifies, and to ensure you are maximising your claim, get in touch today to speak to one of our consultants today.

Please note: This article is provided for information only and was correct as at time of writing (09/01/23). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance.  No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.