21 March 2023

With April fast approaching and updates from the Spring budget, now is a great time for a recap on the changes that companies investing in R&D can expect to take place next month. Arguably, it has not been easy for companies to keep track of the changes, especially for those who do not have an advisor.

For that reason, we have decided to summarise the previous rulings and the latest updates from Jeremy Hunts Spring Budget.

What we already know

The Autumn budget in 2022 was met with mixed emotions from the UK R&D industry, with many changes for both RDEC and SMEs that claim R&D tax incentives.  

The overarching reason for these changes was compliance and abuse of the system. Between 2021 and 2022 fraudulent claims accounted for 4.9% of financial support paid out by HMRC, a 1.3% increase from the previous year. The following changes by the treasury were announced in 2022 to ensure genuine R&D production in the UK (helping boost the UK economy) and project taxpayer money.

Below you can see the breakdown of the changes that both SME and RDEC claimants can expect from the first of April 2023.

Updates from the 2023 Spring Budget

Earlier this month Jeremy Hunt announced two major changes to the original proposal from the 2022 Autumn budget. Firstly, the plan for companies to no longer recharge international subcontracted costs for their R&D back to the UK has been suspended until the first of April 2024. Many companies might make the mistake of seeing this as a positive, where in reality this is simply a 12-month period of breathing room before the inevitable commences. Companies who fall into this bracket should use this time to effectively roadmap moving their subcontractors to the UK to ensure minimal impact on their business. This change is ubiquitous across the UK R&D industry and those who are best prepared will benefit the most.

Secondly, It is no secret that many SMEs would have felt hard done after the autumn 22’ budget. There was positive news for them this spring as the chancellor announced that the flat drop in relief from 33% to 18.6% would be amended to 27% if the business R&D operational costs are above 40%.

Interestingly, nuclear energy in the UK will be considered environmentally sustainable, meaning it can utilise investment incentives such as government funded grants.

Alternative funding options

As an R&D funding specialist, FI Group does not only exist to highlight the available tax incentives but also others such as grants and debt financing.

Click here to find out more about the other available options for UK companies that invest in R&D.

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