As announced at Autumn Budget 2021, the government will legislate in Spring Finance Bill 2023 to reform the R&D reliefs, the Small and Medium-sized Enterprise (SME) scheme and the R&D Expenditure Credit (RDEC).

Commencement dates

The legislation will apply generally to accounting periods starting on or after 1 April 2023 except for the requirement to provide additional information, which will apply to all claims made on or after 1 August 2023.

The rate changes which were announced last year and the separate payable tax credit for research and development intensive companies with surrenderable trading losses will all apply to expenditure incurred on or after 1 April 2023.

Legislative changes to the schemes

The legislation will;

  • create two new categories of qualifying expenditure for R&D tax relief, on data licences and cloud computing services.
  • The definition of R&D for tax reliefs will be expanded to include all mathematics – clarifying in particular that ‘pure maths’ can qualify.
  • mandate that companies must inform HMRC of their intention to make a claim for R&D tax relief using a new digital form. This requirement will apply for claims to relief for accounting periods starting on or after 1 April 2023. As this measure is intended to allow HMRC to perform more upfront compliance on new claimants, companies which have claimed R&D tax reliefs in the previous three years will be exempted from this requirement.
  • require companies to provide a digital additional information form with their claims, supporting HMRC’s compliance work. This requirement, only, will apply to all claims made on or after 1 August 2023’.

Changes will also be made to correct legislation which produces anomalous results.

The previously announced restriction on some overseas expenditure will now come into effect from 1 April 2024 instead of 1 April 2023. This will allow the government to consider the interaction between this restriction and the design of a potential merged R&D relief which has been consulted on recently.

This link will take you directly to the policy paper; Research and Development Tax Relief reform changes

Research and Development Tax relief reform changes – GOV.UK (

Research and development intensive companies

The government will also legislate in Finance Bill 2023-24 to provide additional R&D tax relief for eligible R&D intensive SMEs.

A new credit rate will be available to loss-making companies whose R&D expenditure constitutes at least 40% of total expenditure. Qualifying companies will be able to claim a payable credit rate of 14.5% for qualifying R&D expenditure instead of the 10% credit rate for companies claiming support under the existing R&D SME scheme.

The changes will take effect from 1 April 2023, with eligible companies able to claim once legislation is in place.

The government has published a technical note setting out how this measure works in greater detail. Draft legislation will be published for technical consultation in summer 2023.

The technical note which I mention above, which is titled ‘Additional tax relief for Research and Development intensive small and medium enterprises’ can be found here

Merging of the RDEC and SME schemes

The government’s consultation on merging the RDEC and SME schemes closed on 13 March 2023. The government is currently considering the responses and no decision has been made. The government intends to keep open the option of implementing a merged scheme from April 2024.

The government will publish draft legislation on a merged scheme for technical consultation in summer 2023, with a summary of responses to the consultation. Any final decision on whether to merge the RDEC and SME schemes will be announced at a future fiscal event.

Finally, here’s a link to the main budget page;

Image source: HM Revenue & Customs

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