--- title: "R&D tax credits changed in April 2023 – find out how those changes affect your business" id: "35685" type: "post" slug: "rd-tax-credits-are-changing" published_at: "2022-05-12T10:20:13+00:00" modified_at: "2023-04-13T11:00:00+00:00" url: "https://seedlegals.com/resources/rd-tax-credits-are-changing/" markdown_url: "https://seedlegals.com/resources/rd-tax-credits-are-changing.md" excerpt: "Find out how the qualifying cost categories and rates are changing for the SME and RDEC schemes and how corporation tax changes will have an impact." taxonomy_category: - "R&D Guides" --- 4 min read Expert reviewed This article has been fact-checked by a SeedLegals subject matter expert. [Meet our experts](https://seedlegals.com/authors-and-experts/) and learn more about our review process and quality assurance in our [editorial policy](https://seedlegals.com/editorial-policy/) . # R&D tax credits changed in April 2023 - find out how those changes affect your business Published: May 12, 2022 Updated: Apr 13, 2023 Contents [Changes to R&D qualifying costs](#changes-to-rd-qualifying-costs) [You must make your R&D claim online](#you-must-make-your-rd-claim-online) [You must notify HMRC in advance](#you-must-notify-hmrc-in-advance) [Relief rates for the SME scheme are decreasing](#relief-rates-for-the-sme-scheme-are-decreasing) [Relief rates for the RDEC scheme are increasing](#relief-rates-for-the-rdec-scheme-are-increasing) [How Corporation Tax rate changes affect R&D claims](#how-corporation-tax-rate-changes-affect-rd-claims) [Talk to the R&D experts](#talk-to-the-rd-experts) [Writer Benedict Conry Legal Counsel](https://seedlegals.com/resources/author/ben-conry/) [Editor Suzanne Worthington Senior Writer](https://seedlegals.com/resources/author/suzanne/) **Update for accounting periods starting on or after 1 April 2024** The information on this page applies to accounting periods starting before 1 April 2024. If your accounting period starts on or after 1 April 2024, a new merged R&D scheme is now in place. 👉 [Find out what’s changed and how it affects you](https://seedlegals.com/resources/rd-merged-scheme/) R&D tax relief has long rewarded companies that work on innovative projects in the UK. But, starting April 2023, there were changes to the cost categories and rate changes for both the [SME](https://seedlegals.com/resources/rd-tax-credits-the-ultimate-guide/) and [RDEC](https://seedlegals.com/resources/rdec-tax-relief-scheme/) schemes which mean you would likely get somewhat less, or a lot less, R&D cash back for money spent subsequent to that date. ### Contents - [Changes to R&D qualifying costs](#qualifying-costs) - [You must make your R&D claim online](#claim-online) - [You must notify HMRC in advance](#notify-hmrc) - [Relief rates for the SME scheme are decreasing](#rate-change-sme-rd-tax-relief) - [Relief rates for the RDEC scheme are increasing](#rate-change-rdec-rd-tax-relief) - [How](#corpporation-tax) [Corporation Tax rate changes affect R&D claims](#corporation-tax) - [Talk to the R&D experts](#talk-to-experts) **When did these changes come into effect?** The changes described here applied from 1 April 2023, unless otherwise stated. ## Changes to R&D qualifying costs There are five cost categories for R&D: - Staffing costs (payroll) - Subcontracted costs (SME only, cannot be included in RDEC unless the staff are from a qualifying body) - Expenditure on externally provided workers (for example, agency workers) - Consumables (utilities and raw materials used during R&D) - Software costs (for example, CAD, CAM, Atlassian) These categories will stay in place, but from 1 April 2023, new criteria apply: ### Cloud and data costs are eligible Previously, costs relating to cloud-based technology and data software licences couldn’t be included in an R&D claim. But for accounting periods starting on or after 1 April 2023, you can include these costs in your claim. This is great news for companies who use cloud-based services and rely on data for their research. ### Pure maths is eligible Previously, activities which relate to pure mathematics weren’t eligible for inclusion in R&D claims. The government has updated the [R&D relief guidelines](https://www.gov.uk/government/publications/guidelines-on-the-meaning-of-research-and-development-for-tax-purposes#:~:text=for%20tax%20purposes.-,Update%20March%202023,-Guideline%2015%20shows) to expand the definition of ‘science’ to include ‘mathematical advances’ as science. This means that from 1 April 2023, you can claim a proportion of costs relating to pure maths activities – great news for companies doing R&D in quantum computing, deeptech and more. ### No overseas R&D Subcontracted spend from outside the UK will no longer be eligible for inclusion in R&D claims. The aim of this is to bring more R&D activity to the UK and incentivise companies to move operations into the UK. ## You must make your R&D claim online It’s not just the qualifying costs that are changing. HMRC has also updated the way you need to submit your R&D claim for accounting periods starting on or after 1 April 2023: - Submit the claim online alongside your Corporation Tax return (not by email or post) - Include a summary of the cost categories included in the claim You’ll need to include a brief description of qualifying R&D activities. When you claim with SeedLegals, we already guide you to do this. - Name a senior officer of the company responsible for your R&D claim For example, one of the directors. - Include details of any advisor you used to help with your claim For full details about the information you’ll need to include, read the guidance at the [HMRC website](https://www.gov.uk/guidance/submit-detailed-information-before-you-claim-research-and-development-rd-tax-relief) . ## You must notify HMRC in advance For accounting periods starting on or after 1 April 2023, HMRC has added a new requirement that you must notify them *before* you make a claim. You’ll need to fill in an online form to notify HMRC that you intend to make a claim within six months from the end of the accounting period which your claim covers. This requirement doesn’t apply if you made a claim in one of the three previous accounting periods. To check if you need to notify HMRC in advance and how to send your notifications, read the detailed guidance at the [HMRC website](https://www.gov.uk/guidance/tell-hmrc-that-youre-planning-to-claim-research-and-development-rd-tax-relief) . ## Relief rates for the SME scheme are decreasing The [SME R&D scheme](https://seedlegals.com/resources/rd-tax-credits-the-ultimate-guide/) benefit for loss-making companies decreased from a maximum of 33% cash back to 18.6%. - The enhanced deduction rate will be reduced from 130% to 86% - The ‘surrender’ rate of 14.5% will be decreased to 10%, meaning that the maximum tax benefit for loss-making companies will be 18.6% - Before the changes, the benefit for loss-making SMEs was worth 33p for every £1 of R&D spend - When changes come into effect, the benefit for loss-making SMEs will be worth 18.6p for every £1 of R&D spend - Profit-making SMEs can expect to receive up to 16.34p for every £1 spent on R&D > This reduction in the generosity of the SME R&D tax relief scheme is due to fraudulent activity detected by HMRC. > > [Ben Conry](https://uk.linkedin.com/in/benedict-conry-6ab1b284) > R&D Tax Lead, > > [SeedLegals](https://seedlegals.com/) > > - [https://www.linkedin.com/in/benedict-conry-6ab1b284](https://www.linkedin.com/in/benedict-conry-6ab1b284) ## Relief rates for the RDEC scheme are increasing The RDEC rate increased from 13% to 20%. That means that the overall tax benefit from the [RDEC scheme](https://seedlegals.com/resources/rdec-tax-relief-scheme/#two-schemes) increased from 10.54% to 16.2%. - Before the increase in Corporation Tax, RDEC claims were worth 10.53p for every £1 spend on R&D - From April 2023, RDEC claims relating to accounting periods beginning on or after 1 April 2023 are worth 9.75p for every £1 spent on R&D > R&D tax relief remains an important way to ensure that companies are bringing cash into their business and will still remain a valuable growth tool for genuine claimants. > > At SeedLegals, we can help you navigate the complex legislation, confirm whether you are eligible to claim and how much you are likely to get back as a reduction in corporation tax liability or a cash credit. > > [Ben Conry](https://uk.linkedin.com/in/benedict-conry-6ab1b284) > R&D Tax Lead, > > [SeedLegals](https://seedlegals.com/) > > - [https://www.linkedin.com/in/benedict-conry-6ab1b284](https://www.linkedin.com/in/benedict-conry-6ab1b284) ## How Corporation Tax rate changes affect R&D claims In 2021, the government announced a rise to Corporation Tax which came into effect on 1 April 2023. The rate rise hit profit-making companies hardest and makes calculating their tax rate more complicated: - **Profit up to £50,000** – continue to pay 19% Corporation Tax - **Profit over £250,000** – pay an increased rate of 25% - **Profit £50,000 to £250,000** – pay the 25% rate but can also claim ‘marginal rate relief’ to reduce the rate to 19 to 25% For companies making a profit: - **Claiming R&D relief under the SME scheme** – the increased Corporation Tax rate means you’ll get a higher rate of tax relief - **Claiming R&D relief under the RDEC scheme** – the overall benefit will decrease because RDEC is an ‘above the line’ credit which means it’s taxable at the Corporation Tax rate. ## Talk to the R&D experts Not sure how these changes affect your business? Need some help with your claim? [Book a free call](https://seedlegals.com/talk-to-an-expert/) with our R&D experts. ##### R&D Tax Credits ### Speed up your R&D claim Automate the admin and maximise the amount you get back. Make your claim with unlimited support from our R&D specialists. [Optimise my claim](https://seedlegals.com/grow/rd-tax-credit-claim/) - Sources 1. [Gov.uk | Guidelines on the meaning of research and development for tax purposes](https://www.gov.uk/government/publications/guidelines-on-the-meaning-of-research-and-development-for-tax-purposes) | Accessed 4 April 2023 2. [Gov.uk | Guidance | Research and Development (R&D) expenditure credit](https://www.gov.uk/guidance/corporation-tax-research-and-development-tax-relief-for-large-companies) | Accessed 30 March 2023 3. [HMRC | Guidance | Tell HMRC that you’re planning to claim Research and Development (R&D) tax relief](https://www.gov.uk/guidance/tell-hmrc-that-youre-planning-to-claim-research-and-development-rd-tax-relief) | Accessed 13/04/23 4. [HMRC | Guidance | Submit detailed information before you claim Research and Development (R&D) tax relief](https://www.gov.uk/guidance/submit-detailed-information-before-you-claim-research-and-development-rd-tax-relief) | Accessed 13/04/23 #### Benedict Conry Ben is a qualified lawyer and Legal Counsel with a background in financial services, advising startups, scaleups and major UK companies. [Read more](https://seedlegals.com/resources/author/ben-conry/) [https://uk.linkedin.com/in/benedict-conry-6ab1b284](https://uk.linkedin.com/in/benedict-conry-6ab1b284) ## Related posts [5 min read R&D success stories: meet the companies claiming back cash Meet the innovative companies who have successfully recovered money through the SeedLegals R&D Tax Credits service. Kirsty MacSween](https://seedlegals.com/resources/rd-success-stories/) [12 min read R&D tax credits: The ultimate guide for 2026 How do R&D tax credits work? Are you missing out on tax relief? Find out how to claim back up to 33% of your R&D spend. Michael Atherden](https://seedlegals.com/resources/rd-tax-credits-the-ultimate-guide/) [9 min read RDEC scheme: what it is and how to claim How to get tax relief worth 20% of your R&D spend from the Research and Development Expenditure Credit scheme. What you ... Suzanne Worthington](https://seedlegals.com/resources/rdec-tax-relief-scheme/)