{"id":5160,"date":"2023-05-24T13:22:22","date_gmt":"2023-05-24T13:22:22","guid":{"rendered":"https:\/\/www.bainesjewitt.co.uk\/blog\/?p=5160"},"modified":"2023-05-24T13:22:23","modified_gmt":"2023-05-24T13:22:23","slug":"rd-tax-relief-rates-have-your-plans-adapted-to-the-recent-changes","status":"publish","type":"post","link":"https:\/\/www.bainesjewitt.co.uk\/blog\/rd-tax-relief-rates-have-your-plans-adapted-to-the-recent-changes\/","title":{"rendered":"R&D tax relief rates \u2013 Have your plans adapted to the recent changes?"},"content":{"rendered":"

The UK Government has long encouraged businesses to invest in R&D projects, believing it to be at the forefront of economic growth.\u00a0<\/span>\u00a0<\/span><\/p>\n

<\/p>\n

R&D tax reliefs are, therefore, lucrative and aimed at both Small and Medium Sized Enterprises (SMEs) and larger organisations.\u00a0<\/span>\u00a0<\/span><\/p>\n

However, companies involved in R&D projects should be aware of the Government\u2019s recent reforms to the R&D tax reliefs, which came into force in April 2023.<\/span>\u00a0<\/span><\/p>\n

R&D tax relief for SMEs<\/span><\/b>\u00a0<\/span><\/p>\n

Up until 31 March 2023, the Government allowed profitable Small and Medium Enterprises (SMEs) working on R&D projects to deduct an extra 130 per cent of their qualifying costs from their yearly profit for Corporation Tax purposes.\u00a0<\/span>\u00a0<\/span><\/p>\n

This was on top of the regular 100 per cent deduction \u2013 allowing up to 230 per cent of qualifying expenditure to be offset against their costs.\u00a0<\/span>\u00a0<\/span><\/p>\n

However, as of 1 April 2023, this uplift was reduced to 86 per cent. This is on top of their normal 100 per cent deduction, so a total 186 per cent deduction can now be made.\u00a0<\/span>\u00a0<\/span><\/p>\n

SMEs are also able to claim a payable tax credit if the company has claimed relief and made a loss, the payable credit was worth up to 14.5 per cent of the surrenderable loss but is now 10 per cent.<\/span>\u00a0<\/span><\/p>\n

R&D-intensive businesses (those whose R&D expenditure equates to 40 per cent or more of their total expenditure) still qualify for an enhanced rate of 14.5 per cent.<\/span>\u00a0<\/span><\/p>\n

The Government defines an SME as a business with less than 500 staff and a turnover of under 100 million euros.\u00a0<\/span>\u00a0<\/span><\/p>\n

However, the R&D projects must be in the fields of science and technology.\u00a0<\/span>\u00a0<\/span><\/p>\n

R&D Expenditure Credit (RDEC)<\/span><\/b>\u00a0<\/span><\/p>\n

RDEC is a similar tax relief but is geared towards larger corporations, however, SMEs can claim RDEC if they cannot claim R&D tax relief for small and medium-sized enterprises.\u00a0<\/span>\u00a0<\/span><\/p>\n

As of 1 April 2023, companies can be offered credit worth 20 per cent of their qualifying R&D expenditure which is a rise from the 13 per cent rate offered previously.\u00a0<\/span>\u00a0<\/span><\/p>\n

The RDEC is taxable, but it can be used to offset the corporation tax bill, or claimed as a cash payment, providing significant financial relief for companies undertaking R&D.\u00a0<\/span>\u00a0<\/span><\/p>\n

The other R&D reforms<\/span><\/b>\u00a0<\/span><\/p>\n

In addition to the rate changes, the Government has introduced the following:<\/span>\u00a0<\/span><\/p>\n