Newport-based tax and accountancy specialists Kilsby Williams, believes that Chancellor Jeremy Hunt’s Autumn Statement is a mixed bag for organisations that benefit from the government’s Research and Development (R&D) tax relief schemes.
Kilsby Williams works closely with clients to help them claim R&D tax relief through the government schemes that are designed to incentivise innovation and research spending.
Lucy Lloyd, R&D Tax Specialist at Kilsby Williams said: “For many of our fast growth corporate clients there will be disappointment that the R&D SME scheme has become less generous, and the exclusion of overseas costs from claims has been confirmed.
“A reduction from 130% to 86% of relief, with a reduction in the credit for surrendering tax losses from 14.5% to 10% means the cash value of the relief will nearly halve from 33.35% to 18.6% for expenditure incurred after 1 April 2023. This is on top of the PAYE cap for the SME scheme introduced in 2021.
“Thankfully, the expansion of eligible expenditure to include, among others, data and cloud computing costs will remain. The compliance changes recently announced, including the requirement to notify HMRC in advance of the intention to make a claim within six months of the year end, have also been retained.”
However, for large companies, things are more optimistic with the expansion of the Research and Development Expenditure Credit Scheme (RDEC).
Lucy said: “The generosity of the RDEC scheme for large companies (or SMEs undertaking subsidised R&D activity) has increased from 13% to 20%, resulting in a change in cash value from 10.5% to 15%. There are rumours afoot that the two schemes will merge into one RDEC type scheme in the future, so we watch with interest for future developments in this area.
“There are unquestionably difficulties in the market with the SME scheme being exploited by fraudulent activity (in some, well publicised cases touched on in the Chancellor’s statement), but it’s hard to see how a blunt change in the rates will prevent this occurring. Arguably the reduced generosity will encourage those who partake in this activity to be more aggressive.”
