Autumn Statement 2022: What it means for R&D Tax Relief

Yesterday, during The Autumn Statement Jeremy Hunt stated “I have decided today to cut the deduction rate for the SME scheme to 86% and credit rate to 10%, but increase the rate of the separate R&D Expenditure Credit from 13% to 20%. Despite raising revenue the OBR have confirmed that these measures have no detrimental impact on the level of R&D investment in the economy. Ahead of the next budget we will work with industry to understand what further support R&D intensive SMEs may require.”

These changes will apply to expenditure incurred on or after 1 April 2023.

Whilst the rate of relief for SMEs will be reduced, in practical terms the reduction will be largely offset for profitable SMEs by the rise in the headline corporation tax rate to 25%. The shift will be felt most by loss-making SMEs and it is unclear how reducing the funding available to businesses in the start-up/growth/scaling-up phase will help tackle fraud and abuse, whilst the clear winners following the most substantive change to the R&D tax relief scheme in 20 years are large companies.

Should you have questions on the impacts of the changes announced to your business’s R&D claim, please do get in touch.