Research and development tax relief slashed for small business scheme

As part of the review of research and development (R&D) tax reliefs the government is reforming the reliefs to ensure taxpayers’ money is spent 'as effectively as possible'. It states there is 'significant error and fraud in the small and medium-sized enterprises (SME) scheme with the generosity of the relief making it a target for fraud. By contrast the separate R&D expenditure credit (RDEC) is better value but has a rate that is less internationally competitive'. The government is therefore ‘rebalancing’ the rates of the reliefs.

For expenditure on or after 1 April 2023 the small and medium-sized enterprises (SME) additional deduction will decrease from 130% to 86% and the SME credit rate will decrease from 14.5% to 10%. However the research and development expenditure credit (RDEC) rate will increase from 13% to 20%. The chancellor said these changes were a...