Compared to recent Budgets and Autumn statements the Chancellor was relatively quiet on the Research and Development schemes.
Two changes were announced.
https://www.gov.uk/government/publications/spring-budget-2023
“Boost” for R&D intensive companies. Companies whose R&D expenditure is greater or more than 40% of their total expenditure and are loss making will get a better rate of R&D Tax Credit. Facts are thin on the ground but it states that this will bring 27p in the pound as opposed to 18.60p in the pound. This is based on the rates from 1st April 2023 where SME claimants were facing a 40+% cut. Practically it seems the current 14.5% credit rate will continue to apply to companies who are loss making and R&D intensive. It is hard to view this as a “boost” as based on the maximum claim amount a claim is currently worth 33p in the pound and for these intensive companies support will fall to 27p, as opposed to 18.60p.
Comment.
Given the current level of attack on SMEs claiming this tax incentive any positive news is good news. For some the cuts will be less severe.
I have a major concern as with any threshold this may encourage abuse. Companies are being incentivised to inflate their R&D claims to 40% of company expenditure to get a much rate of credit. I don't like that. The schemes should be respected and claims should be correctly assessed. Keeping the rate at 14.5% for all would have been a much better policy.
It is very late notice on a practical level for such a change. As is often the case I imagine the required changes to the CT600 and tax software to cope with two rates of R&D Tax Credit and the 40% of total expenditure threshold will run late and be buggy.
R&D tax reliefs: delay implementation of overseas expenditure restrictions by one year.
Comment.
The House of Lords Economic Affairs Committee report 2023 on “R&D Tax Reliefs and the R&D Expenditure Credit”. Considered this a good measure and advanced claim notification a bad one. Yet this change has been delayed while we assume claim notification will be in place for periods starting 1st April 2023. It is hard to conceive why they would delay. It is good news for companies who rely on overseas subcontractors for R&D. It is somewhat annoying that as a consultant I have told clients that this is coming but it will now come in a year later than previously stated. I do always give a caveat on these changes that we do not know they are happening at all until they are law.
Chris Toms – Compliance Director RandDTax