Question to the HM Treasury:

To ask the Chancellor of the Exchequer, if he will provide guidance to small businesses looking to respond to changes in Small Business Tax Credits without reducing research activity.

At Autumn Budget 2021 and Tax Administration & Maintenance Day 2021 the Government announced a series of changes to the Research & Development (R&D) tax credits. These included allowing Data and Cloud costs to qualify for relief, introducing restrictions on overseas spend and measures to target abuse and improve compliance.

At Autumn Statement 2022 the Government announced that it would rebalance the rates of the small and medium-sized enterprises (SME) and R&D expenditure credit (RDEC) reliefs to ensure taxpayers’ money is spent as effectively as possible.

HMRC will publish draft guidance on these changes before the end of the year and will invite comments on the guidance. HMRC will also engage with business representative bodies to ensure they are aware of the changes.

The Government will also consult on the design of a single scheme, and ahead of Budget work with industry to understand whether further support is necessary for R&D intensive SMEs, without significant change to the overall cost for supporting R&D.