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SME R&D tax credit cut criticised by ATT

18th November 2022

The Association of Taxation Technicians (ATT) has criticised proposed changes to SME R&D tax credits from the Autumn Statement.

Chancellor Jeremy Hunt announced on Thursday (17 November) that the SME additional deduction will be cut from 130% to 86%, and the SME credit rate would drop from 14.5% to 10%.

Hunt said the deductions are to combat fraud and abuse of the scheme, while the Treasury added the change "improves the competitiveness" of the R&D expenditure credit scheme (RDEC) for larger companies.

The rate of the RDEC will increase from 13% to 20%, but there are fraud concerns here, too, with HMRC estimating businesses overclaimed up to £725 million under the scheme in the 2020/21 tax year.

The ATT criticised the changes, suggesting that the plans won't tackle fraud but harm smaller businesses by cutting funding.

Senga Prior, chair of the ATT's technical steering group, said:

"We share the Government's concerns over abuse of the R&D relief schemes and strongly support efforts to crack down on such abuse of the tax system and improve compliance.

"But we do not believe that restricting the level of relief available to all SMEs is a proportionate way to achieve this."

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