Update to Research & Development tax claims

New (tax) year, new rules

At the beginning of the new tax year in April, there will be changes for those looking to make research & development (R&D) claims. With HMRC’s increased scrutiny around R&D it is important those looking to benefit from this relief, are up to date with the changes.

Change in rates

From 1 April 2023, the Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20%, for small to medium enterprises (SMEs) additional relief will decrease from 130% to 86%, and SME company tax credit rate will go from 14.5% to 10%.

Additional compliance

HMRC have confirmed they are increasing their interest in those making R&D claims, and as such, have introduced new compliance measures. As of the1st April 2023, companies making R&D claims are going to need to provide a lot more information to HMRC, in support of their claim:

  • First time R&D claimants and R&D claimants who have not made an R&D claim in any of the previous three calendar years, will need to submit a claim notification form for their R&D claim to be valid
  • Companies that are making an R&D tax relief claim, will need to submit an Additional Information form alongside their claim

Alongside this, there are also changes to the list of qualifying expenditure.

Overseas Expenditure

  • Expenditure on overseas subcontractors will only be available if the work was performed in the UK
  • Expenditure on payments for externally provided workers must be subject to PAYE and NIC
  • Consumables acquired from overseas will still qualify for additional relief

Expenditure on cloud and data

Currently, costs related to cloud computing and data are not considered qualifying expenditure for R&D tax relief. However, from 1st April 2023 these costs will be allowable when making an R&D claim.

For more information around these new rules or anything else tax related, contact our Business Tax Team on 01903 234094.