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    Tag: R&D tax relief

    Businesses must prepare for £18 billion corporation tax increase

    Posted on by Rebecca Campbell

    Following the Chancellor’s decision to reinstate the Corporation Tax increase in the Medium-Term Fiscal Plan, the £18 billion tax hike will go ahead as planned from 1 April 2023.

    The Corporation Tax rate is currently 19%, and will rise to 25% in April, raising an estimated £12 billion in the first year, rising to £18 billion by 2025/26, with a system of tapered relief for companies with profits of between £50,000 and £250,000. The significant increase and additional tax burden could lead to a significant reduction in investment and even increase the risk of businesses closing, especially given the current economic climate with rising interest rates and inflationary pressures.

    The tax burden businesses are facing is higher than we have seen in the last two decades, with owner managed businesses likely to feel the biggest impact. These types of business owners may be unable to consider inward investment to grow as they may need to retain their profits to pay their household bills.

    Planning for an increase of this scale means it is more important than ever for SMEs to actively manage their corporate tax liabilities, and take full advantage of available tax reliefs to their liquidity, including:

    • Maximising the Annual Investment Allowance (AIA) of £1m
    • Claiming R&D tax relief
    • Increasing pension contributions
    • Maximising benefits for your team and focus on employee wellbeing
    • Considering electric vehicles

    If you are considering moving forward with an option outlined above, we would recommend speaking to your adviser before taking any action.

    Get in touch

    For more information, or to discuss your specific circumstances in more detail, contact corporate tax director, Claire Astley, by clicking the button below.

    Maximise your SME R&D tax relief claims before 1 April 2023

    Posted on by Rebecca Campbell

    The 2022 Autumn Statement saw the Chancellor, Jeremy Hunt, put forward various changes to UK tax policy, including upcoming adjustments to the R&D tax relief scheme which are due to come into force from 1 April 2023.

    In our latest blog, we explore what these changes are and why you should consider maximising your R&D tax relief claims by 31 March 2023.

    What changes can we expect from the R&D tax relief scheme?

    The current rate for SMEs is an extra deduction of 130% on qualifying R&D expenditures. From 1 April 2023, the rate will be reduced to 86%, and based on the increased Corporation Tax rate of 25% (currently 19%), the net effect R&D rate for relief falls from 24.7% to 21.5%.

    Simply put, every £100,000 spent on R&D is currently worth £24,700,and will reduce to £21,500 from 1 April 2023.

    How will this impact loss-making companies?  

    Loss-making companies who surrender losses for tax credits will be further affected as the surrender value will be reduced from 14.5% to 10%, and the net benefit will fall from a potential maximum of 33% to 18.6% (£33,000 to £18,600 based on the £100,000 R&D expenditure scenario detailed above).

    How can companies ensure they make the most of the relief?

    It would be beneficial for SMEs to consider advancing any R&D projects into Q1 of 2023 where possible to make the most of the 130% / 14.5% relief. It would also be worth thinking about maximising any large outlays on expenditure, for example wages or buying materials, into the first quarter of 2023, ensuring that costs are actually incurred in this period and records are kept.

    Get in touch

    It is no secret that HMRC are tightening up the R&D scheme as a whole, therefore, it is more important than ever to ensure companies maximise their claims as far as possible, whilst ensuring they have robust evidence of the projects carried out and the qualifying costs incurred. To discuss your specific R&D projects and tax relief claims in more detail, contact Claire Astley using the button below.

    Upcoming changes to the R&D tax relief scheme

    Posted on by Rebecca Campbell

    From 1 April 2023, R&D tax relief is changing, following announcements in the 2021 Autumn Budget. But what do these changes mean for your business?

    The Research and Development Communication Forum (RDCF) recently met in July 2022 to discuss the upcoming changes, the most significant being:

    • Restrictions for businesses conducting R&D activities overseas
    • Inclusion of cloud computing and data costs in qualifying R&D expenditure
    • Increased focus on compliance and tackling abuse of the tax credit scheme
    • Requirement of a senior company officer to sign off R&D claims

    Perhaps the most notable discussion point at the RDCF meeting was the requirement for companies to inform HMRC of their intention to make an R&D claim ‘within six months of the end of the period to which the claim relates’. If you are unsure whether you will make a claim, it’s worth submitting an advanced notification to HMRC, just in case, as there won’t be a penalty if the claim doesn’t go ahead.

    The requirement to provide prior notice of an R&D claim will only apply to new claimants, or organisations who have not made an R&D claim in the previous three years.

    According to HMRC guidance, there doesn’t seem to be any flexibility on the six-month notification period, therefore advanced planning and proactiveness will be required in identifying R&D projects as they arise and not as part of an organisation’s Corporate Tax Return preparation, which could be up to 12 months post accounting year-end.

    Take action

    We would recommend speaking to your accountant if your organisation undertakes research and development and has not yet made an R&D tax relief claim. Your adviser will work with you to agree a process of ongoing in-year project review, as the six-month advanced notification could mean many eligible organisations are unable to make an R&D claim due to engaging accountants who are not experts in this specialist area of tax, and therefore opportunities to identify activities taking place in the year may be missed.

    If you would like to discuss the changes to the R&D tax relief scheme which are due to take effect from 1 April 2023, get in touch with PM+M corporate tax director, Claire Astley, by clicking the button below.