New 2023 R&D tax credits change in relief rates
From 1 April 2023 the rates of tax relief for SME R&D tax credits scheme will decrease, whilst the RDEC rates will increase:
- Profitable companies using the SME R&D tax credits scheme were previously able to claim tax relief of 130% on qualifying expenditure which has now been reduced to 86%
- Loss-making companies using the SME R&D tax credits scheme were previously able to claim 14.5% of qualifying expenditure as tax credit; this has now been reduced to 10% *
- Profitable companies using the RDEC scheme were previously able to claim tax relief of 13% on qualifying expenditure and this has now increased to 20%
- Loss-making companies using the RDEC scheme were previously able to claim tax credits at a rate of 13% of qualifying expenditure and this has also now increased to 20%
* The one exception to loss-making companies claiming tax credit under the SME R&D tax credits scheme is that they will still be able to claim the previous higher rate of 14.5% so long as they can establish that they are an R&D-intensive company. This is currently defined as a company where their total R&D expenditure is at least 40% of their overall total business expenditure (including any connected companies).
Depending on the scheme and the size of company, R&D relief is either received as a cash payment or an offset against Corporation Tax (via the CT600).
There are two types of relief:
- Small and medium-sized enterprise (SME) R&D tax relief, whilst
- Large companies can claim R&D expenditure credit (RDEC)
Regardless of how they are received, since 2000, R&D tax reliefs have been a valuable tax relief for eligible companies. Where there is involvement with innovative research and development / improvement of processes, product or services, organisations may rely on the relief as financial support.
From 01 April 2023, significant claim notification reforms were made where the company’s accounting period started on or after this date. Online, you will have had to provide the following information:
- The company’s UTR or Unique Taxpayer Reference, matching that shown on the Company Tax Return
- The primary senior internal R&D contact in the company responsible for the R&D claim
- The contact details of any agent /accountant involved in the claim
- The accounting period start and end date for the R&D tax relief or RDEC claim, matching that shown on the Company Tax Return
- A summary of the high-level planned activities
Box 656 on the Company Tax Return must be marked ‘X’ indicating to HMRC that the claim notification has been made and supplementary form CT600L must be completed.
The Chancellor of the Exchequer announced at Budget 2023 that an online Additional Information Form must be submitted to support all R&D claims from 01 August 2023. Agent Update July 2023 advised this date has been changed to 08 August 2023.
We can help with your R&D claims, providing expert technical expertise. Get in touch today on 01727 730550.