Question to the HM Treasury:

To ask His Majesty's Government what assessment they have made of the impact on (1) small businesses, and (2) innovation and growth, if the current Research and Development (R&D) tax relief scheme, including the available rebate of R&D costs, is withdrawn.

As part of the ongoing Research and Development (R&D) tax reliefs review, the Government announced at Autumn Statement 2022 that we are reforming the R&D tax reliefs to ensure taxpayer’s money is spent as effectively as possible, whilst leaving the level of R&D related business investment in the economy unchanged.

The permanent increase from 13 per cent to 20 per cent for the R&D Expenditure Credit rate announced at Autumn Statement 2022 also means the UK now has the joint highest uncapped headline rate of tax relief in the G7 for large companies.

The Government recognises the value of R&D intensive SMEs to the UK’s wider innovation ecosystem, and at Autumn Statement 2022 committed to working with industry ahead of Budget to understand whether further support is necessary for R&D intensive SMEs. Following this, the Chancellor has announced further support targeted at those R&D intensive companies most affected by the previous changes.

The Government will introduce an higher rate of tax relief for R&D intensive SMEs. Loss-making companies claiming the existing SME tax relief will be eligible for a higher payable credit rate of 14.5 per cent if they meet the definition for R&D intensity, instead of the 10 per cent credit rate for non-intensive companies.

Alongside this, from April the Government will extend the scope of qualifying expenditures the reliefs to include data and cloud computing costs.