Additional Tax Relief for R&D Intensive SME Companies

A technical note has been released, ahead of legislation due to be published later this year in relation to the additional tax relief available for R&D intensive SME companies.

From 1 April 2023, for loss-making SME companies, the R&D tax credit rate is set to fall from 14.5% to 10%.

HMRC are recognising the value of R&D intensive SME companies in the UK’s wider innovation ecosystem and the difficulties they face with raising capital, therefore, they are looking to introduce additional relief for such companies, subject to conditions.

R&D Intensive definition

This definition will calculate R&D intensity as the ratio of the company’s qualifying R&D expenditure for a period to its total expenditure for the same period. SMEs will be eligible for this scheme for a period if they have an R&D intensity, defined as above, of 40% or above in that period.

This will not come into force until the legislation is published, therefore, eligible claimants may wish to delay their submission in order to benefit from the higher 14.5%, otherwise, they will need to claim at the reduced 10% (or amend later for the difference). I can see this having cash flow implications for a number of clients so any such delay should be built into your budgets and forecasts.

It’s said that claimants are expected to be subject to additional checks, so there will potentially be longer delays than with a normal SME claim.

If you have any queries regarding Tax Relief for R&D Intensive SME companies or would like to discuss our services further, please don’t hesitate to contact Gina Gardner at gina.gardner@ballardsllp.com

Disclaimer.

This article has been prepared for information purposes only. Formal professional advice is strongly recommended before making decisions on the topics discussed in this release. No responsibility for any loss to any person acting, or not acting, as a result of this release can be accepted by us, or any person affiliated to us.