Chancellor Jeremy Hunt has announced further changes to the UK’s R&D tax relief schemes, during today’s Spring Budget.
There had been growing calls to abandon plans to cut R&D tax credits for SMEs and while these cuts are still going ahead, there is one positive update for innovative companies which rely on this vital source of funding.
Loss-making SMEs investing at least 40% of their total expenditure in qualifying R&D will be able to claim a payable tax credit of 14.5%. This is an unexpected rise on the 10% rate which was originally due to be introduced on 1 April. Consequently, around 20,000 companies will be eligible to reclaim up to £27 for every £100 invested in R&D.
It is hoped that this incentive will help to offset some of the cuts being made to the R&D tax credit scheme, particularly for research-intensive start-ups in fields such as AI, life sciences and fintech.
Meanwhile, tax relief for larger companies spending on R&D will rise. The rate for the Research & Development Expenditure Credit (RDEC) scheme will increase from 13% to 20% from 1 April.
The government is still reviewing the possibility of amalgamating SME R&D Tax Relief and RDEC into a single scheme, with further consultation beginning in the summer.