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What did the 2023 Spring Budget say about R&D tax relief?

16th Mar 2023
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The R&D industry has been holding its breath, waiting for clarity from the Spring Budget. Unfortunately, we were mostly disappointed.

The Chancellor of the Exchequer Jeremy Hunt, accompanied by his ministerial team and watched by his wife and children, leaves 11 Downing Street on his way to deliver the budget.
Picture by Simon Walker / No 10 Downing Street

Over the past months, there’s been a huge amount of speculation about the future of the R&D tax relief schemes. For example, will the SME scheme be rolled into the RDEC scheme? Will HMRC’s new portal be operational for 1 April? And what’s the deal with claim pre-notification, given that the House of Lords recommended that it be scrapped?

We were hopeful that Wednesday’s Spring Budget would shed some light on what’s coming for the R&D schemes – but were left disappointed.

What did we learn about R&D tax relief in the Spring Statement 2023?

As far as R&D tax relief is concerned, the headlines are that:

  • From 1st April, loss-making “R&D-intensive” SMEs will be able to claim for a more generous payable cash credit. This equates to £27 per £100 spent on R&D, rather than just under £19 for other companies;
  • “R&D intensive” SMEs will be deemed to be those that spend at least 40% of their total expenditure on R&D;
  • The new rules preventing relief on expenditure on overseas subcontractors will be delayed by a year, to 1 April 2024; 
  • Additional information about the claim (and who prepared it) will need to be submitted to HMRC for all claims made on or after 1 August 2023.

Various industry groups had been lobbying hard for life sciences and artificial intelligence companies to be protected from the cuts in the rates of SME R&D tax relief, so it wasn’t a surprise to see the Chancellor extend an olive branch in the direction of R&D-intensive companies.

What was a surprise, however, is that the requirement for additional information has been accelerated. Previously, this was due to apply to claims beginning on or after 1 April 2023. As such, it would largely affect claims ending 31 March 2024. 

Today’s Budget brings that date forward to 1 August 2023 – meaning that some R&D advisors will need to provide much more information about their R&D claims than they’ve been used to.

Will the government go ahead with combined R&D schemes from April 2024?

So, this does answer some of our questions. For example, it looks like HMRC’s new portal will now be ready for 1 August, rather than 1 April. Also, it looks like HMRC intends to press ahead with its plans for pre-notification, despite pressure for it to be ditched.

Related: Changes to R&D tax relief legislation from April 2023

But as to whether the Government will end the current SME scheme in favour of a single R&D scheme based on RDEC, we’ll need to wait for this to be confirmed.

If you want read our more detailed analysis, coming next Tuesday, or stay up to date on all the news and changes coming to R&D tax relief, sign up for our free monthly newsletter, The R&D Review.