Corporation Tax: Research and Development small or medium-sized enterprises rules — technical correction to intensity ratio definition
This tax information and impact note is about a change to legislation to make sure that Research and Development (R&D) expenditure credit (RDEC) qualifying expenditure is included in the calculation of the R&D intensity ratio for all claims to the enhanced rate from its introduction in April 2023.
Documents
Details
At Spring Budget 2023 the then Chancellor announced enhanced support for Research and Development (R&D) intensive small or medium-sized enterprises (SMEs), applying from 1 April 2023. The original details were set out in a technical note which stated that the relief would be available where R&D intensity (the ratio of qualifying R&D expenditure to total expenditure in a period) was 40% or more. Further changes were announced at Autumn Budget 2023.
Legislation was introduced in the Finance Act 2024. In this legislation, the R&D intensity calculation does not take account of any expenditure of the company for which it is entitled to Research & Development Expenditure Credit (RDEC). The change ensures that this expenditure will be taken into account so that all companies that were originally intended to benefit from the enhanced relief will be able to do so.