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Spring Budget: Startup R&D tax credit changes slammed as ‘short-sighted’

Spring budget 2023 Jeremy Hunt leaves Downing Street to unveil a partial reversal of R&D tax credit cuts
Image credit: Simon Dawson / No 10 Downing Street

Chancellor Jeremy Hunt has announced a partial reversal to R&D tax credit cuts in the Spring Budget after facing months of pressure from startup advocacy groups.

Startups had warned that the cuts, first announced by Hunt last November in the Autumn Statement, would hinder growth for early-stage and research-intensive tech companies.

The measures were originally planned to kick in from 1 April. They would have reduced the SME R&D deduction rate from 130% to 86%, while the surrenderable losses rate was set to drop from 14.5% to 10%.

According to auditor BDO, this meant support for loss-making companies would have dropped from an effective 33.4% subsidy to an 18.6% subsidy.

One study by Coadec, a policy voice for UK startups, found that the R&D change could see companies on average worse off by £100,000....