--- title: "July 2022: Get ready for R&D tax relief changes in 2023" id: "28856" type: "post" slug: "rd-tax-relief-whats-changing-and-how-it-affects-startups" published_at: "2022-07-21T16:00:58+00:00" modified_at: "2022-07-21T18:00:58+00:00" url: "https://seedlegals.com/resources/rd-tax-relief-whats-changing-and-how-it-affects-startups/" markdown_url: "https://seedlegals.com/resources/rd-tax-relief-whats-changing-and-how-it-affects-startups.md" excerpt: "The Government's changes to research and development tax claims will come into effect in 2023. Here's how the changes might affect your company." taxonomy_category: - "R&D Guides" --- 4 min read # July 2022: Get ready for R&D tax relief changes in 2023 Published: Jul 21, 2022 Contents [The changes apply to claims from 2023](#the-changes-apply-to-claims-from-2023) [Your cloud and data spend will count](#your-cloud-and-data-spend-will-count) [Pure maths will be allowed](#pure-maths-will-be-allowed) [Your spending should be in the UK](#your-spending-should-be-in-the-uk) [You must make R&D claims online](#you-must-make-rd-claims-online) [You’ll need to inform HMRC in advance](#youll-need-to-inform-hmrc-in-advance) [You’ll need to give more details in your R&D claim](#youll-need-to-give-more-details-in-your-rd-claim) [The increase in National Insurance will be covered](#the-increase-in-national-insurance-will-be-covered) [Find out more about changes to R&D tax relief](#find-out-more-about-changes-to-rd-tax-relief) [Get back more of your R&D spend](#get-back-more-of-your-rd-spend) [Talk to an expert](#talk-to-an-expert) [Benedict Conry](https://seedlegals.com/resources/author/ben-conry/) **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/) On 20 July 2022, the UK Government published changes to the existing [R&D Tax Credits](https://seedlegals.com/grow/rd-tax-credit-claim/) scheme to refocus on UK-based innovation and to tackle fraudulent claims. The measures are draft legislation – it isn’t yet law but we expect the changes will apply to claims for accounting periods beginning on or after 1 April 2023. At SeedLegals, we’re experts in R&D claims – we help startups claim cash or tax credits worth up to 33% of their R&D spend. We take part in HMRC’s Research & Development Communication Forum ([RDCF](https://www.gov.uk/government/groups/research-development-consultative-committee) ) where we champion the interests of UK startups and contribute to discussions on policy. The draft legislation covers both R&D Tax Relief schemes: R&D Expenditure Credit (RDEC) for larger businesses, and R&D relief for small or medium enterprises (SME). In this post, we explain how the changes affect UK startups. ## The changes apply to claims from 2023 We expect the changes below will apply to claims for accounting periods beginning **on or after 1 April 2023**. ## Your cloud and data spend will count Consumables and software are already included in the definition of ‘qualifying expenditure’ – the Government will extend the definition to include the costs of your cloud system and datasets, including storage and hosting. At SeedLegals, we’re delighted to see this update to the R&D claims rules – if you’re an innovative startup, more of your software costs will qualify. ## Pure maths will be allowed Pure maths will now be allowed under the definition of R&D for tax relief. This is great news if you’re using pure maths – for example, if your startup works with AI, quantum computing, risk analysis or algorithms – you can now include these costs in your R&D claim. **Prepare for your claim: R&D tax credits checklist** [Find out what you need to make a successful claim.](https://help.seedlegals.com/hubfs/Marketing%20downloadables/R&D%20checklist.pdf) ## Your spending should be in the UK The Government wants to refocus R&D tax relief towards innovation undertaken in the UK so your R&D spend must either be UK expenditure or qualifying overseas expenditure. You’ll have to show that any ‘overseas’ expenditure is necessary because in the UK we don’t have or you can’t replicate the right geographical, environmental or social conditions. For example, if your startup is involved in deep ocean research or you’re carrying out clinical trials which can only be done in a particular area outside the UK. In the draft legislation, HMRC have confirmed that if you can’t find the workers you need in the UK and you have to contract overseas workers or an overseas company, you won’t be able to include these costs in your R&D claim. The exception to this is if the activity your workers are doing outside the UK is a permitted R&D activity. **R&D Tax Credits calculator:** [Work out how much you might be able to claim](https://seedlegals.com/rd-calculator/) ## You must make R&D claims online To tackle fraudulent claims, all claims must be made digitally. Companies exempt from doing an online company tax return will be exempt from this rule. ## You’ll need to inform HMRC in advance If you plan to make a claim, you’ll need to inform HMRC in advance. There will be a digital service to do this, and you’ll need to let them know within six months of the end of the period for which you’ll be making the claim. You won’t need to notify HMRC if you’ve already claimed in one of the previous three accounting periods. Even if you’re not sure if you’ll go ahead to make a claim, it’s worth notifying HMRC in advance. There won’t be a penalty if you decide not to claim. ## You’ll need to give more details in your R&D claim These measures are designed to improve compliance and tackle fraudulent claims: - **Break down your costs** You’ll need to list your costs under the qualifying categories. - **Add a short description** Write an outline of your research and development. - **Add a senior officer** A ‘senior officer’ of your company – for example, a Director – will need to ‘endorse’ (put their name on) your claim. - **Add details of your agent** If an agent advised your company on compiling your R&D claim – for example, if your tax advisor or accountant helped with your claim – you’ll need to include details of the agent in your claim. ## The increase in National Insurance will be covered R&D claims can include the National Insurance you pay your staff. The claim rules have been updated to include the new Health and Social Care Levy on National Insurance. [Get money back with our R&D Tax Credits services](https://seedlegals.com/resources/rd-tax-credits-service/) Find out if you're eligible and how to make your claim with SeedLegals. ## Find out more about changes to R&D tax relief At SeedLegals, we welcome these changes to R&D tax relief which will modernise the schemes to make them more fair and appropriate for innovative UK startups. In this post, we’ve covered the changes most likely to affect small businesses – there are other changes to the R&D tax relief rules that affect larger companies, companies that are part of a group, and incorrect claims. To read about the changes to the schemes in full, read the Government’s [policy paper](https://www.gov.uk/government/publications/research-and-development-tax-relief-changes/research-and-development-tax-relief-reform) . The draft legislation isn’t yet signed off – it’s possible the changes will be amended or added to before they’re incorporated into law. ## Get back more of your R&D spend Want to maximise your R&D claim and make sure it’s accepted first time? Read our [ultimate guide to R&D Tax Credits](https://seedlegals.com/resources/rd-tax-credits-the-ultimate-guide/) and book a call with our expert team to find out how we can help. ## Talk to an expert Whatever your question, we’ll match you with the right specialist. It take less than a minute to set up your FREE call: #### 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 [12 min readR&D tax credits: The ultimate guide for 2026How 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/) [3 min read3 things you didn’t know about R&D Tax ReliefR&D Tax Relief is a UK govt incentive scheme that allows companies to claim back roughly 30% of the money they spent... Jonathan Prezman](https://seedlegals.com/resources/things-you-didnt-know-about-rd-tax-relief/) [4 min readCan grants and R&D tax credits be used together?As a startup, you’re probably constantly in search of funding to fuel your business. Depending on the stage of your busi... Jonathan Prezman](https://seedlegals.com/resources/can-grants-and-rd-tax-credits-be-used-together/)