form, which will be required for claims made on or after 1 August 2023. The restriction to relief on overseas expenditure, designed to refocus support towards UK innovation, will now come into effect from 1 April 2024 instead of 1 April 2023. Comment The increase in the RDEC rate means the UK now has the joint highest uncapped headline rate of tax relief in the G7 for large companies. The government is currently considering responses to a consultation on merging the RDEC and SME schemes and expects to publish draft legislation for technical consultation in the summer.
Comment The AIA amounts to full expensing for 99% of businesses. The long-term ambition is to make Full Expensing and the 50% FYA permanent. Research and Development (R&D) relief For expenditure on or after 1 April 2023, the Research and Development Expenditure Credit (RDEC) rate will increase from 13% to 20% but the small and medium- sized enterprises (SME) additional deduction will decrease from 130% to 86% and the SME credit rate will decrease from 14.5% to 10%. A higher rate of SME payable credit of 14.5% will apply to loss-making SMEs which are R&D intensive. To be R&D intensive the ratio of the company’s qualifying R&D expenditure must be 40% or above the company’s ‘total expenditure’ for the period. This equates to a receipt of £27 for every £100 of R&D expenditure.
Making Tax Digital (MTD) for income tax
The MTD regime is based on businesses being required to maintain their accounting records in a specified digital format and submit extracts from those records regularly to HMRC. In what appears to be a never-ending story, the government has announced a further delay in MTD for income tax self assessment (ITSA). The mandation of MTD for ITSA will now be introduced from April 2026, with businesses, self- employed individuals and landlords with income over £50,000 mandated to join first, a change from the original £10,000 limit. Those with income over £30,000 will be mandated from April 2027. The government will also review the needs of smaller businesses and look in detail at whether the MTD for ITSA service can be shaped to meet the needs of smaller businesses. Following the new approach, the government will not extend MTD for ITSA to general partnerships in 2025. HMRC has previously announced that MTD for corporation tax will not be mandated before 2026. This now looks even further away.
Other announced changes to the R&D regime include expanding qualifying expenditure to include the costs of datasets and of cloud computing. All claims for R&D reliefs will have to be made digitally and be accompanied by a compulsory additional information form. Companies will also need to notify HMRC that they intend to make a claim within six months of the end of the period of account to which the claim relates, generally if they have not made an R&D claim in the previous three years. These changes apply to claims in respect of accounting periods which begin on or after 1 April 2023 apart from the additional information
Business
Page 8
Made with FlippingBook Learn more on our blog