Month: November 2023

by Pronovotech Pronovotech No Comments

Autumn Statement 2023 – R&D Tax Relief Scheme Changes

As expected, the Autumn Statement, delivered on Wednesday 22nd November, confirmed the merger of the SME and large company R&D schemes, starting with accounting periods beginning on or after 1 April 2024.

The single scheme will take the form of the existing large company R&D Expenditure Credit (RDEC) scheme which provides a taxable 20% above-the-line credit – effectively a grant.

Changes for Loss-Making Companies

The RDEC scheme also features a payable credit for loss-making companies.

A change announced on Wednesday though is that the tax deduction from the credit will be 19% for loss-makers rather than the current 25%, meaning an effective benefit of 16.2%.

This still compares unfavourably with the reduced current rate under the SME scheme of 18.6% – already much reduced from the previous benefit of up to 33.35%.

In another relaxation, the R&D expenditure threshold for R&D-intensive loss-making SMEs – who can claim a higher rate of credit of just under 27% – will be reduced from 40% to 30% of total expenditure. This is forecast to benefit some 5,000 companies. Additionally, a year of grace will apply so a company exceeding the threshold in year 2 can still benefit from the enhanced rate.

Changes Relating to Subcontracting

A major change to the proposed rules is in relation to subcontracting.

The original proposal was for an SME-scheme style system where the paying company would claim. Now, the company that decides R&D is required will have the right to claim, which could be the customer or the supplier depending on the circumstances. This broadly corresponds with how most understand the current law to operate in any event, with a number of cases due to be heard at First Tier Tribunal (FTT) level in the coming months.

In our view, the latest changes to the proposed single scheme are to be welcomed in our view, particularly the subcontract rules.


If you have any queries on the proposals or indeed any aspect of R&D tax relief do get in touch.