What did the Chancellor announce in the Spring Budget today?
The R&D tax relief schemes were again mentioned by The Chancellor of Exchequer, Jeremy Hunt today, as a follow-up to announcements in the Autumn statement.
There are a lot of moving parts at the moment, see the technical detail note here. With a new relief for R&D intensive SMEs who will qualify for an enhanced rate of R&D tax relief, a delay to restrictions on overseas expenditure from 2023 to 2024, and the potential move to a single, combined RDEC and SME scheme in April 2024.
All in all, this feels like a partial reversal and further signalling of using the single scheme as a platform for greater project targeting.
Indication of enhanced tax relief rate for R&D intensive SMEs
Specifically, we have an indication of how an R&D intensive business will be defined, i.e. SMEs that spend 40% or more of their total expenditure on eligible R&D. We can assume it will be that the 27% rate announced at the despatch box may be applied under a future, combined RDEC scheme which would make the enhanced rate 27% compared to previously announced standard RDEC rate of 20%.
As ever the devil could be in the detail but it is good to know that these innovative companies won’t fall through the cracks of any changes to the SME R&D tax relief scheme. We await the supporting technical note with interest.
Delays to R&D scheme announcements from Autumn 2022
It seems unlikely that there is any delay in the changes to the SME scheme rates that were announced in November 2022 and are due to be implemented on 1 April 2023.
However, it has been announced that there will be a delay of one year to the implementation of restrictions on overseas R&D expenditure, which will come into effect 1 April 2024 rather than 1 April 2023. This is a move we certainly welcome, and all changes should be made with the design of a future merged scheme in mind.
We remain very supportive of ensuring the scheme refocuses support for long-term domestic benefit and it is encouraging that govt have listened to the feedback of many on the practical and beneficial usage of overseas talent.
The government will publish draft legislation on the merged scheme for technical consultation alongside the draft Finance Bill in the Summer 2023.
Other support for UK’s innovative industries
Overall there was a lot of good news to champion UK’s most innovative industries.
- The Chancellor has reconfirmed the intent to make the UK a science and technology superpower.
- Innovative sectors were specifically mentioned, e.g. life sciences, creative industries, carbon capture, offshore wind, and advanced manufacturing.
- MedTech, AI, and Quantum, as expected, are the key sectors of innovation growth as already outlined in The UK Science and Technology Framework.
- There is a proposal for 12 new investment zones, new innovation centres, and LEPs moving to local government decision making.
- A super deduction replacement with a 3 year scheme to full capital expensing against tax.
- Increased rate to creative tax relief rates.