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ARTICLE · 16 MARCH 2023

Research & Development: More Changes On The Horizon

Hillier Hopkins
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Research & Development (R&D) relief was introduced with the aim of incentivising companies to invest in innovation. Currently, there are two schemes; Research & Development Expenditure...

United KingdomLaw Practice Management
Beverley Wood
Beverley Wood

Research & Development (R&D) relief was introduced with the aim of incentivising companies to invest in innovation. Currently, there are two schemes; Research & Development Expenditure Credit ("RDEC") for large corporations and the Small and Medium Enterprises ("SME") scheme.

Each scheme has different rates and rules which will apply. Although the RDEC claims are larger in value the cumulative SME claims cost the Government £7.7bn in 2021/22. A rapid increase in the number of submitted SME claims have resulted in a reform of the regime. From 1 April 2023 new rules will be in place which aim to align the two schemes.

SME Scheme

SME's can claim an additional 130% deduction of qualifying expenditure, totalling 230% deduction. Every £1 spent on qualifying R&D tax relief of 43.7p is received (£1 x 230% x 19%). In some circumstances a tax credit can be claimed, the rate is 14.5% which is lower than the corporation tax rate at 19% (due to increase to 25% in April

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