In the 2023 Autumn Statement, the Chancellor unveiled substantial changes to the Research and Development (R&D) tax relief scheme. These revisions include the merging of the existing R&D Expenditure Credit (RDEC) and the R&D SME schemes into a single scheme. This new, consolidated scheme introduces an above-the-line credit that allows businesses to claim their qualifying R&D expenses, including those for contracted R&D. It also integrates the more beneficial aspects of the SME scheme, such as the PAYE and National Insurance contributions cap. Nonetheless, the scheme imposes certain limitations on claims for overseas expenditures, which will be effective for accounting periods starting on or after April 1, 2024. For more information read of our merged scheme blog.

As the schemes merge, this represents another significant evolution in the R&D tax relief landscape. We recognise that the continual changes over recent years have been perplexing and challenging for companies to navigate. At MPA, R&D tax credits are a core service we offer, and we are committed to clarifying these changes. Additionally, our team of specialists are on hand to address any concerns about how this new scheme may impact your business. Here is a brief excerpt of what one of our experts said about the reasons for the scheme merger, taken from one of our webinars: Claim with Confidence: Adapting to the R&D Tax Credit Scheme Merger.

The merger of the Research and Development (R&D) Tax Relief schemes and the introduction of enhanced support for R&D-intensive companies in the UK are part of broader reforms to make the tax relief system more effective and supportive of innovation.

Less Red Tape: Simplicity is key. By merging the existing R&D Expenditure Credit (RDEC) scheme and the Small and Medium Enterprises (SME) R&D relief into a single, unified scheme, the process is simplified for companies. This change aims to reduce administrative burdens and make it easier for businesses to understand and claim their eligible relief.

Enhanced Support for R&D-Intensive Companies: The government recognises that R&D-intensive companies drive significant innovation and economic growth. Providing enhanced support to these companies can lead to more high-quality R&D activities, boosting technological advancements and competitive edge in the global market.

Encouraging More Industries to Innovate: The reforms may also seek to make R&D tax relief more accessible to a wider range of companies, including startups and smaller firms that may not have previously qualified or found the process too cumbersome.

Boosting the Economy: The changes are part of the government’s broader economic strategy to promote the UK as a hub for science and technology innovation. By incentivising R&D activities through tax relief, the government aims to stimulate private sector investment in research and development, which is crucial for long-term economic growth and competitiveness.

The exact details of the merged scheme and what constitutes “enhanced support” for R&D-intensive companies would be outlined in the specific legislative changes and policy documents released by the government.

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