R&D tax credit changes from August 2023

Date: July 17, 2023

Additional R&D tax credit changes (also known as Research and Development tax credits) took effect in August 2023. These were originally due to be operational in April 2023 but were delayed by the Chancellor. This means that any claim from 8 August 2023 will now require much more information. This is in addition to other changes implemented in April 2023.

The August R&D tax credit changes will bring additional complications and an increased time burden for many companies in the provision of this additional detailed information. Fortunately, Alexander & Co already provides this extra level of scrutiny as a standard for all its Research and Development claims.

Check if you are eligible to claim R&D tax credit by using our complimentary service.

August 2023 R&D tax credit changes

From August 2023, additional detailed information relating to the research undertaken needs to be submitted to HMRC in a R&D tax credit claim. A new additional information form is required for this. Failure to include this information will result in automatic rejections of any claim. HMRC believes this will help identify fraudulent claims.

R&D tax credit claims – technical information

You need to provide a detailed description of the projects in your R&D tax credit claim. How many projects you describe will depend on the total number of projects relating to the claim.

You must provide detailed information with regards to six specific questions:

Explain which R&D tax credit scheme you are applying under and the amount you are seeking to claim.
Describe the main field of science or technology relating to the claim.
Describe the baseline level of science and technology at which you plan to advance.
Explain the advance in scientific or technical knowledge that you aimed to achieve.
Detail the scientific and technological uncertainties that the project faced.
Explain how the project looked to overcome the detailed uncertainties.

Previous R&D tax credit changes

In Budget 2023, the Chancellor Jeremy Hunt explained that he wanted to make taxes more competitive in the UK’s life science and creative industry sectors. Previous changes to R&D tax credits include:

R&D Enhanced Credit

Budget 2023 introduced an enhanced credit for R&D, in a £1.8 billion package of support, claiming to assist 20,000 UK companies.

This measure means that if a qualifying SME business spends 40% or more of their total expenditure on R&D, they can claim a credit equal to £27 for every £100 spent.

The Chancellor gave an R&D enhanced credits example where an eligible company spending £2 million on research and development would receive over £500,000 from this scheme.

Cloud & data costs and pure mathematics

Qualifying R&D tax relief expenditure is now extended to include cloud and data costs. The relief also includes pure mathematics as a qualifying cost. These changes to R&D tax credits came into effect on 1 April 2023. This was one of the R&D tax credit changes not delayed until August 2023. New Research and Development tax relief rates for the SME and RDEC schemes now apply.

Get in touch with us today if you require more information on this.

Upcoming R&D tax credit changes

R&D tax credit restrictions

The restriction on claiming R&D tax credit relief for overseas expenditures is postponed. This will now come into effect a year later than planned, on 1 April 2024. The government claims this is to allow time to review feedback and to enable it to act upon its recent R&D consultation. This consultation was on the implementation of a single, simplified research and development (R&D) tax relief scheme, merging the existing two schemes.

Alexander & Co – expert Research and Development tax advice from Qualified Chartered Tax Advisors

Keep you up-to-date with any future changes to R&D tax credits through our news section.

Alexander & Co’s many years of expertise ensures that all R&D claims are conducted correctly, accurately and to the highest professional standards.

We work with a diverse range of businesses undertaking R&D tax claims. Get in touch with us today to find out how we can assist your business and help it flourish.