R&D tax relief - an invaluable time to claim. For two reasons...
1. The changing rate of relief
Following the much-anticipated Autumn budget, a number of changes were announced to the R&D tax legislation in a bid to reduce fraud and error, which, over the years, has been found to be inherent with the SME scheme.
Consequently, for expenditure incurred on or after, 1st April 2023, the following rate changes apply:
- The rate of enhanced expenditure (additional relief) for SMEs undertaking qualifying R&D will reduce from 130% to 86%
- Therefore, for profitable SMEs, instead of saving 24.7p in the £1, the value of the relief will reduce down to somewhere between 16.34p and 22.79p per £1 spent, depending on the level of profitability; and
- For loss making SMEs the tax credit rate will reduce from 14.5% to 10% meaning those who currently claim up to 33.35p in the £1 will see a reduction to 18.6p in the £1 – almost halving the value of such claims.
The new rate changes will affect all allowable costs incurred post April 2023, and so we will see these changes gradually taking effect over the next 12-18 months.
2. The requirement to pre-notify
If you have not claimed R&D tax relief (in the last 3 accounting periods), your ability to claim retrospectively 2 accounting periods is soon to be gone. For accounting periods beginning on or after 1st April 2023 (for example, Y-E 30 March 2024), companies are required to inform HMRC, in advance, of their intention to make an R&D claim. They will need to do this, using a digital service, within 6 months of the end of the period to which the claim relates. In this example, and assuming the company had not made a claim in any of the preceding 3 accounting periods, the company would not be able to make a claim if it hadn’t pre-notified HMRC of its intention to do so by 30th September 2024.
The impact of the new changes cannot be overstated. Under current rules, a company is often able to make a claim for the previous two accounting periods by taking advantage of the statutory right to amend a tax return up to 12 months after the filing deadline. For example, at the time of writing (January 2023) a company with a 31 March year end could feasibly make a claim for the 31 March 2021 period, as well as the more recent 31 March 2022 period. The deadline for a 31 March 2021 claim would be 31 March 2023 (i.e. 12 months after the statutory filing deadline of 31 March 2022).
Act Now
It’s critical then, particularly for claimant companies with a March Y-E, to act now in order to fully benefit from the current higher rates and enjoy their 2-year retrospective claim entitlement.
Your deadline to obtain your full entitlement and higher rate benefit is 31 March 2023.
The message is clear. If you’re thinking of making a claim and haven’t made a claim in the last 3 years, act now.
Contact us: hello@yes.tax
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