21 October '22

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Since the mini budget on 23 September there have been a number of subsequent policy yo-yos. And who knows what the expected financial statement from Jeremy Hunt will say on October 31st. If he’s still the Chancellor by then. What will this mean for R&D?

The Mini Budget on 23rd September indicated that Corporation Tax rates would remain static at 19% from April 2023, a departure from the previously announced rise to 25%.

We are all now aware of the subsequent apologies and reversals, now indicating that the planned hike in rates to 25% for profits above £250,000 is here to stay.

Whilst the increase in tax rates will undoubtedly impact businesses, there is a silver lining for tax paying SMEs. They will see their R&D claim benefit become even more valuable providing additional relief of up to 32.5% (an increase from 24.7%).

Not such good news for large companies as the increased rate will erode the taxable benefit received under the RDEC scheme…

Read more in our recent article HERE.

Another other factor to consider is that the short-term increase in national insurance through the 1.25% Health & Social Care Levy (HSCL), will still be removed from 6 November 2022. The recent publication of the draft R&D legislation made it clear that the HSCL may be included within R&D claims as staff costs. These increased costs will now be for a short window of four months from 6 July 2022 – 6 November 2022. However, well worth including in a claim, to claim additional tax relief while it lasted.

We have been told there is more to come, and we wait with interest for more announcements about innovation. It would not be unreasonable to expect an increase in the large company R&D credit rate to counter the increased corporation tax rates. Watch this space.