R&D: Reform on the cards
On the 13th January, the government launched a consultation aimed at discussing the simplification of the UK’s R&D tax relief scheme.
This follows the changes to the rates of relief for the two R&D schemes that were announced in last year’s Autumn Statement, where the rates for relief were changed significantly for expenditure after 1st April 2023. These changes were effectively the first step towards a simplified, single RDEC-like scheme for all companies.
The UK is unusual for the fact that it has two separate schemes – one for SMEs, and another for large companies, known as the RDEC scheme, and there are several differences between the way the two schemes operate which adds a layer of complexity for both companies and advisors.
The consultation is designed to understand how a single scheme could be designed and implemented, thereby replacing the existing two R&D relief schemes.
While simplification is a key driver behind the aim to develop a new single R&D scheme, another important driver is the intention to develop a scheme that is less susceptible to fraud.
If a new single R&D scheme is to be implemented it is the government’s intention that it will be in place for expenditure incurred from 1 April 2024 onwards.
While the new single scheme is only at the consultation stage, it is the government’s intention that the ‘merged’ scheme will be heavily based on the RDEC scheme. If this is the case, unless the merged scheme permits expenditure on sub-contracted R&D costs, thereby expanding the scope of qualifying expenditure from the current RDEC scheme, many SME’s may find that the level of their qualifying costs could be significantly reduced.
Want to know how the proposed changes might impact on your company’s R&D claim? Our R&D specialists can help. Please contact us at email@example.com for more information.