For accounting periods beginning on or after 1st April 2024, the UK government has introduced a significant change to the R&D tax relief system. The previous SME and RDEC schemes have been replaced by a new, unified scheme. This change aims to simplify the claims process, reduce misuse, and offer clearer, more consistent support for businesses investing in R&D activities.
If your company is involved in R&D, it's essential to understand how the new scheme works, what’s different from the old system, and how your eligibility and benefits may change.
Some of the Key changes in the Merged Scheme:
- A Single Scheme Replaces the SME and RDEC Schemes: Under the new rules, businesses will now operate under one set of guidelines. The relief rate is based on the previous RDEC scheme. This provides a more consistent approach across company sizes.
- R&D-Intensive SMEs Receive Tailored Support: Certain SMEs that spend at least 30% of their total costs on qualifying R&D may be able to access enhanced support. This is designed to maintain strong incentives for highly innovative small businesses.
- Updated Rules on Grants and Subsidies: Under the Merged R&D Scheme, receiving a grant or subsidy no longer affects whether your R&D costs are eligible. All qualifying expenditure whether subsidised or not, is treated the same. This removes a key complexity from previous rules and opens the door for more businesses to benefit from R&D relief.
- Updated Rules on Subcontracted R&D: HMRC have updated the rules around subcontracted R&D. Generally, the R&D now lies with the company that decided to undertake the R&D activity. That could be the costumer or the subcontractor, depending on the situation.
- Overseas R&D Is Mostly Excluded: Most R&D activity must now take place within the UK. Exceptions apply where the conditions outside the UK are necessary for the purpose of R&D. These conditions could be geographical, environmental or social, or refer to legal or regulatory requirements.
Next Steps for Your Business:
- Review all ongoing and planned R&D activities to ensure they still qualify under the new criteria.
- Confirm your accounting period, as the merged scheme applies to accounting periods beginning on or after 1 April 2024.
- Re-examine subcontracting relationships and clarify who has the right to claim.
- Adjust financial forecasts based on the new relief rates and rules.
- Consider speaking to an advisor to make sure your company is compliant and not missing out on valuable support.
Need Help Navigating the Changes:
If you're unsure how the new rules affect your business or need guidance on your next claim, our team is here to support you. We offer eligibility reviews, strategic advice, and full assistance with claim preparation.
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