During the Autumn Statement, the Chancellor announced many changes, which we covered in our most recent summary here.

However, one stands out from the rest for innovative companies – the reduction to the research & development (R&D) additional tax deduction and loss-making tax credits for SMEs.

In his speech, Jeremy Hunt confirmed that from April 2023 R&D tax relief would be altered as follows:

• The additional deduction for the SME scheme will be reduced from 130 per cent to 86 per cent – to make a new total deduction of just 186 per cent
• The SME credit will decrease from 14.5 per cent to 10 per cent

This means if you are a loss-making company, you will now only receive £18.60 for every £100 spent from April next year, compared to £33.35 per £100.

Intended to reduce abuse in the R&D tax system, particularly claims for SMEs, these reforms are the result of research and investigations by HM Revenue & Customs (HMRC).

While they might help to prevent some abuse in the system, they may also reduce the amount of support available to SMEs and disrupt existing plans that some companies may have had for the future.

Businesses with upcoming R&D projects need to understand how these adjustments will affect them, alongside the other R&D reforms already planned for April next year, as well as the impact of the increase to Corporation Tax for more profitable businesses.

Want to learn more about this and the other changes in the Autumn Statement, watch our latest on-demand webinar here.