REAP Conference 2024 registration is open
Book tickets, feature in the technology exhibition or apply for a REAP bursary - available for farmers and those in full-time agriculture-related study

MMP Tax explains the details behind the R&D intensive tax credit

Member News
The views expressed in this Member News article are the author's own and do not necessarily represent those of Agri-TechE.

At the time of the Autumn Statement, MMP voiced its concerns regarding the scheme-wide reduction in generosity of the R&D Tax Credit for SMEs.

The fear was that genuinely innovative businesses would be punished for offences committed by others. To some extent, those concerns have been acknowledged in the Spring Budget 2023.

In the Budget Statement, the Chancellor announced that for expenditure from 1 April this year, loss-making SMEs with a minimum R&D intensity of 40% will be eligible for an enhanced payable credit of 27p for every £1 spent on eligible R&D. This is a big increase over 18.6% net benefit rate for other loss-making SMEs.

In this instance, the 40% benchmark for R&D intensity will be calculated as the ratio of the company’s qualifying R&D expenditure set against its non-Corporation Tax deductible total expenditure over the same period.*

The qualifying R&D expenditure is defined as expenditure that is eligible under the existing R&D tax schemes.

Once the legislation is in place, eligible SMEs will be able to claim the credit at this higher rate through their CT return but the legislation may not be voted into law until Summer 2023. In the meantime, however, claimants will have to initially claim the payable credit under the lower 10% rate and amend the claim at a later date or delay submission of their claim until the Finance Bill is enacted.

This new measure equates to a 27% net benefit that will have a positive impact on some of the UK’s most innovative businesses. MMP warmly supports this move, but remains disappointed that genuinely innovative SMEs continue to remain unprotected from the slashing of the R&D Tax Credit announced in the Chancellor’s Autumn Statement, ostensibly to reduce fraud and abuse.

The large scale abuse of the R&D tax scheme is a significant problem that requires addressing but to continue to do so at the expense of those who are compliant is not only short-sighted, it is unnecessary. There are far more effective tools the government has at its disposal for targeting fraudulent claimants and MMP will continue to seek for their consideration and inclusion.

*Total expenditure for this purpose will be calculated from the total expenses figure in the profit and loss (P&L) account, adjusted by adding any amount of expenditure used under s1308 Corporation Tax Act (CTA) 2009 and by subtracting any amount not deductible for CT purposes.