R&D tax credit changes April 2023

This piece is related to R&D tax credits in April 2023 – visit our August 2023 R&D tax credit changes article for the most recent changes to R&D tax credits.

The Chancellor announced R&D tax credit changes at Budget 2023. Whilst previous announcements appeared to reduce the scope of some claims, especially for SMEs and to help curb reported misuse, announcements in Budget 2023 appeared to give something back.

In the Budget, the Chancellor stated that he wanted to make taxes more competitive in the UK’s life science and creative industry sectors. He added that in his previous Autumn Statement, he said he would come back with a more robust R&D tax credit scheme for smaller research-intensive companies.

R&D Enhanced Credit

Budget 2023 introduced an enhanced credit for R&D, in a £1.8 billion package of support, claimed 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 example where an eligible company spending £2 million on research and development would receive over £500,000 from this scheme.

For companies with profits of at least £250,000, tax relief is worth 21.5%. This is a slight decrease of 3.2% from the previous rates prior to the April 2023 R&D tax credits changes. You can make an R&D tax credit calculation by taking the enhancement rate of 130% and multiplying it by the old 19% corporation tax rate, then compare this to the new enhancement rate of 86% when it is multiplied by the current 25% corporation tax rate.

Cloud & data costs and pure mathematics

From 1 April 2023, qualifying R&D tax relief expenditure was extended to allow cloud and data costs and pure mathematics as qualifying costs. New Research and Development tax relief rates for the SME and RDEC scheme will also take effect.

Find out more changes by reading our blog on the latest R&D tax credit changes.

R&D tax credit changes were delayed

Restrictions on overseas expenditure in R&D delayed

The restriction on claiming R&D relief for overseas expenditures will now come into effect next year. This will now be on 1 April 2024, instead of 1 April 2023. The government claims that this is to allow time to review feedback and enable it to act upon its recent R&D tax credit consultation

This consultation was on the implementation of a single, simplified R&D tax relief scheme. This would also look at merging the existing two schemes.

Additional Information Form requirements were extended until August 2023

R&D tax credit applicants were due to submit an Additional Information Form where accounting periods began on or after 1 April 2023. The Chancellor then announced at Budget 2023 that this will now be required for all claims made as of 1 August 2023. This was then delayed by a further week until 8 August 2023 due to delays in Finance Bill timetabling.

This announcement brings forward the requirement for many companies to provide extra information. However, Alexander & Co already provides this extra level of scrutiny as standard for all its R&D tax credit claims.

Alexander & Co – expert R&D tax credit advice from Qualified Chartered Tax Advisors

Alexander & Co’s R&D tax credit team consists of qualified Chartered Tax Advisors and Chartered Accountants, so you can rest assured that you are in safe hands. Our years of expertise ensure all R&D tax credit 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 to find out how we can assist your business.

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