What UK SMEs Need to Know About R&D Tax Credits After 4 Years of Change

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Running a business in the UK, you’ve likely heard mixed opinions about R&D tax relief.
One says “it’s not worth it anymore.” The other says “we’re getting more support than ever because we’re R&D-intensive.”

The truth lies somewhere in between – and depends largely on how R&D-focused your company is.

At Hamilton Wood & Company, we assist SMEs across sectors, from tech to food production, giving us insight into how the reforms impact real-world businesses.

The “Headline Cuts” – Who Really Got Hit

The headline changes that everyone talks about are the that took effect in April 2023.
For many SMEs, the additional deduction dropped to 86%, and loss-makers saw their cash credit fall from 14.5% to 10%.
This meant that many loss-making SMEs saw their maximum benefit fall from roughly 33% to around 18.6%.

The “Quiet Boost” – R&D-Intensive SMEs

What’s often overlooked is the fact that R&D-intensive SMEs still get generous support.
Loss-making SMEs with R&D constituting at least 40% of their total expenditure (30% from 2024) can still access the 14.5% cash credit.
This allows them to claim up to around 27% of their eligible R&D expenditure.

The Merged Scheme – What It Means for SMEs

From April 2024, the old SME and RDEC schemes will effectively merge into one R&D Expenditure Credit system.
The merged scheme provides a 20% taxable credit on eligible R&D spend.
For many SMEs, this remains a valuable incentive, especially if claims are carefully structured and optimised.

New Process Hurdles

The merger of the schemes brings clarity but adds new requirements.
SMEs now need to be aware of the PAYE/NIC cap, mandatory Additional Information Forms, and pre-notification deadlines.

For companies with significant overseas R&D activities, it’s crucial to understand the new restrictions on overseas costs starting in April 2024.

How Hamilton Wood & Company Can Help

Running an SME means juggling multiple priorities, and understanding all the tax relief changes can be overwhelming.
Hamilton Wood & Company helps simplify the process by identifying eligible R&D projects, modelling likely benefits, and ensuring your claims are fully compliant.

Want to know how these changes impact your business? Hamilton Wood & Company is here to guide you through it.

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