Client Newsletter

SME R&D Tax Relief is being reduced – Act now!

How will these latest measures affect your plans for innovation?

In the Autumn Statement, the Chancellor delivered many important new tax measures.

However, one stands out – the reduction to the research & development (R&D) additional tax deduction and loss-making tax credits for SMEs.

From April 2023 R&D tax relief rates will be altered as follows:

  • The additional deduction rate for the SME scheme will be reduced from 130% to 86% – to make a new total deduction rate of just 186%
  • The SME credit rate will decrease from 14.5% to 10%

If you are a loss-making company, you will now only receive £18.60 for every £100 spent from April next year, compared to £33.35 per £100.

As a profit-making company you will now only receive between £16.34 and £21.50 depending on profit levels following the changes to Corporation Tax next year.  This is compared to the current deduction of £24.70 per £100.

Given these changes, it may make sense to bring forward planned R&D expenditure into the current tax year to take advantage of the current rates of tax relief.

These changes are intended to reduce abuse of the R&D tax system, which has been the spotlight of several investigations by HM Revenue & Customs (HMRC).

Businesses with R&D plans need to know how these changes will affect them.

They come at a time of considerable change and will be introduced alongside the other R&D reforms already planned for April, as well the increase to Corporation Tax for more profitable businesses.

If you are concerned about what these changes may mean for you and your business.

Speak to our team today