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Tax relief for R&D intensive SMEs

30 November 2023

April 2024 brings significant R&D tax changes, including mergers, reduced rates, and enhanced support for SMEs. Loss-making companies benefit from lower tax rates and thresholds, while a one-year grace period aids those missing intensity thresholds.

The Autumn Statement announced the merger of the existing R&D Expenditure Credit from April 2024. In addition to the merger of the Small and Medium Enterprise Scheme from the same date.

They also confirmed an enhanced regime for R&D intensive SMEs. The merged scheme will reduce the tax rate for loss-making companies from 25% to 19%. Additionally, the merged scheme will lower the threshold for additional support for R&D intensive loss-making SMEs to 30%.

Companies claiming the existing SME tax relief and meeting the definition for R&D intensity will qualify for a higher payable credit rate of 14.5%. This results in saving £27 per £100 spent on qualifying R&D in terms of effective tax.

Starting from April 1, 2024, the intensity threshold for accounting periods will be reduced to 30%. A loss-making SME company with qualifying R&D expenditure of 30% or more of its total expenditure will be able to claim the enhanced support for any accounting period beginning on or after that date.

There will be a one-year grace period for companies that fail to meet the R&D intensity threshold due to a qualifying one-off event. This will apply to companies that had successfully claimed enhanced support in the previous year. The one-year grace period will apply to accounting periods beginning on or after 1 April 2024.

Source: HM Revenue & Customs Tue, 28 Nov 2023 00:00:00 +0100

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