Changes to R&D in the Spring Budget – What do you need to know?

There were many changes announced in the recent Spring Budget, which included updates to R&D intensive companies and the planned reforms which were set to change on 1 April 2023.

R&D-intensive companies to get special relief

A new ‘enhanced credit’ for some R&D intensives businesses was announced in a bid to encourage growth and attract investment. This will come into effect on 1 April 2023.

To be considered R&D intensive, a company’s qualifying R&D expenditure should be worth 40 per cent or more of its total expenditure.

This announcement targets R&D intensive SMEs making a loss. Those eligible will be able to claim a rate of 14.5 per cent in comparison to the 10 per cent rate that non-R&D intensive loss-making companies can claim.

The initiative will be beneficial to SMEs who are facing the Corporation tax rise and previously proposed cut in the rate to R&D relief.

Changes to R&D reforms

The R&D reforms are still due to go ahead but two changes were made in the Spring Budget.

All claims made on or after 1 August 2023 will require additional information. This was expected to apply from 1 April 2023, so it is a slight extension on the measure coming into effect.

The planned restriction on overseas expenditure will apply from 1 April 2024 instead of 1 April 2023.

The Government will use this time to consider this measure and how it will work with the plans for the merged R&D tax relief scheme.

For advice on these new changes and how they will affect your business, get in touch with us.