- R&D tax relief reform set to simplify the system and help
grow the economy
- Clearer information about how much relief business will
receive to be offered up front, helping them budget for R&D
- Follows £20 billion investment in R&D from government at
Autumn Statement and the Chancellor’s pledge to understand how to
provide further support for R&D intensive SMEs
The Government has today (13 January) launched a consultation to
simplify the UK’s R&D tax relief system, drive innovation and
grow the economy.
The 8-week consultation, which runs from 13 January to 13 March
2023, sets out proposals on how a single scheme could be designed
and implemented. This would replace the two R&D tax relief
schemes currently in place - the Research and Development
Expenditure Credit (RDEC) and the small and medium enterprises
(SME) R&D relief.
A scheme modelled on the current RDEC for SMEs would also give
decision makers in smaller companies clearer information, which
will help them set budgets for R&D. In contrast, for those
claiming SME tax relief in the current setup, the exact amount of
money their firm will receive can only be known with certainty at
the end of accounting period.
This is part of the government’s ongoing R&D tax reliefs
review, and follows changes announced at Autumn Statement 2022
where the generosities of the two R&D tax schemes were
broadly aligned, with the Chancellor pledging to work with
industry to understand how to provide further support for R&D
intensive SMEs.
The UK’s R&D tax reliefs have an important role to play in
encouraging more businesses to invest in R&D, helping them to
grow and create the technologies, products and services which
reshape lives and livelihoods.
Government spending on R&D plays a crucial role in
stimulating private sector investment which is why it is
increasing investment to £20 billion a year by 2024-25 - the
largest ever increase in a Spending Review period.
, Financial Secretary to
the Treasury, said:
“We are focussed on growing the economy – with thriving
businesses bringing more jobs, higher pay and more tax revenue to
fund our precious public services.
“Getting R&D tax relief right and fit for the future sits
at the heart of making sure the UK remains a competitive location
for cutting edge research – helping new firms grow.
“I welcome views on the option to simplify the scheme,
especially from those who have experience of the existing tax
reliefs.”
The UK is unusual in having two schemes and moving to a single
measure would simplify the R&D tax system in line with the
government’s overall plans for tax simplification.
The government would like to hear from a wide range of sources
including individuals, companies, representative and professional
bodies, and especially invites comments from research and
development intensive businesses and those representing them.
The government recognises the reform to the rates creates
challenges for some R&D intensive SMEs and those in the life
sciences sector in particular and believes there is merit to the
case for further support. Any further changes will be announced
in the usual way, at a future fiscal event.
If implemented, the new scheme is expected to be in place from 1
April 2024.
Notes to editors
