Ian Davie
Senior Consultant
The R&D tax relief schemes are continuing to go through a period of change. The previously announced Merged Scheme, combining the SME and RDEC schemes into a single RDEC scheme covering SMEs, Large Companies and subsidised projects starts 1 April 2024. For companies claiming, this will apply not from the 1 April 2024 but from the first accounting period starting after the 1 April. This will provide a consistent benefit of 15-16%, moving away from the vagaries of the SME scheme with variable benefit claims depending on the level of profit or loss made by the company.
Along with the Merged Schemes there is two other major changes, both on eligibility of sub-contractor and EPW costs. The first will now focus on UK costs rather than foreign costs, though foreign costs could still be eligible under certain specific circumstances. The second is that the company contemplating the R&D, the decision maker, will be able to claim for the eligible R&D costs. This is similar to the previous SME scheme treatment of subcontracting but will apply to companies of all sizes. These are both significant shifts in policy and operation of the R&D tax reliefs.
To compensate for the new lower SME and Merged Scheme rates, an additional Research-Intensive SME scheme was announced to ensure these companies were adequately supported with a benefit rate of 27%, as opposed to the merged scheme 15-16%. Announced quite a while ago and though intended from the 1 April 2023, the legislation only passed recently so eligible companies are now having to update their claim from 1 April 2023 for the RI scheme.
The Spring Budget 2024 brought only a couple of minor changes. HMRC will establish an expert advisory panel to support the administration of the R&D reliefs, across cutting-edge key sectors such as tech and life sciences. This is to help HMRC correctly identify what is baseline and advances within a sector.
Also announced at the Spring Budget the Government are consulting on ways to strengthen the regulatory framework in the tax advice market, including R&D agents. There are several ways HMRC can engage with agents, but this is intended to bring some control following a wild west period of some R&D tax agents claiming for virtually anything they could get away with. With the large-scale compliance checks in place from HMRC this has already had an effect with some accountancies pulling away from the R&D tax relief market and one of the larger renowned high fee consultancies, RDI Solutions, shutting down. These measures aim to restore integrity and accountability to the R&D tax relief landscape, ensuring that claims are grounded in genuine innovation and compliance with regulations.
If you need to discuss any of the points above and how this could affect your company then please get in touch with our team.
Book an appointment todayExplore TBAT Innovation's latest insights on HMRC’s R&D statistics, highlighting key trends in R&D tax relief claims, compliance, and the measures introduced to reduce error and fraud. Learn how TBAT’s expertise supports businesses in navigating these changes and ensuring their R&D claims are compliant.
Like many R&D tax credit professionals and accountants, TBAT have conducted a number of compliance checks, supporting both our own claims and those of clients who sought assistance with claims prepared by others. In our latest article, we take you through how TBAT Innovation is managing these compliance checks.
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