In the Autumn Statement of 2022 significant changes to the R&D Tax Credit scheme were announced.

For expenditure on or after 1 April 2023, the Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20%, the small and medium-sized enterprises (SME) additional deduction will decrease from 130% to 86%, and the SME credit rate will decrease from 14.5% to 10%.

These rate changes will be legislated for in the Autumn Finance Bill 2022. This reform ensures that taxpayer support is as effective as possible, improves the competitiveness of the RDEC scheme, and is a step towards a simplified, single RDEC-like scheme for all. The government will consult on the design of a single scheme, and ahead of Budget work with industry to understand whether further support is necessary for R&D intensive SMEs, without significant change to the overall cost envelope for supporting R&D. As previously announced at Autumn Budget 2021, the R&D tax reliefs will be reformed by expanding qualifying expenditure to include data and cloud costs, refocusing support towards innovation in the UK, and targetting abuse and improving compliance. These changes will be legislated for in Spring Finance Bill 2023. 

The changes are significant and will adversely impact SME's, particularly loss making ones, effectively reducing the benefit by up to 45%. The announcement also notes the rise in fraudulent claims and abuse of the scheme, so it is more important than ever to ensure your R&D advisor is giving you compliant advice.

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