Are you aware of the newly merged R&D (Research and Development) relief scheme? Well, following on from last year’s Autumn Budget, the scheme has now come into effect, implemented for accounting periods beginning after 1st April 2024. It has presented significant changes to R&D tax incentives which are likely to affect Small Medium Enterprises (SMEs) claiming R&D tax relief in the UK.
If your business is making advancements on R&D projects, it is vital you understand what the new scheme will mean for any relief entitlement claimed for the new accounting period. As specialist advisors for SMEs, particularly in R&D, we can guide you through the changes to ensure you’re fully prepared, providing actionable advice tailored to your business.
What is the newly merged R&D scheme?
The scheme has seen two of the current R&D tax relief incentives (R&D Expenditure Credit (RDEC) and the R&D SME scheme) merge into one unified programme. It is expected to offer improved tax benefits and refundable credits for SMEs investing in R&D. The existing RDEC will be included in the scheme, which allows large companies, SME subcontractors, and organisations conducting subsidised R&D to claim credit against their R&D expenditures.
If you claim R&D tax relief for your business, you are likely to be impacted by the new programme. Despite the new scheme having been designed to simplify the process, there are still differences that your business will need to be aware of.
To determine eligibility for R&D tax incentives as an SME, you must ensure your company has fewer than 500 staff and meets either of the following criteria:
- Turnover of no more than £100 million.
- Gross assets of no more than £86 million.
You also need to assess whether your company is responsible for initiating and conducting the R&D activities, or if these activities are outsourced to another entity within the supply chain. Typically, companies may not be eligible to make a claim for R&D tax incentives if the R&D work has been contracted to them.
What do you need to do?
If your business spends less than 30% of your total expenditure on qualifying R&D, then, for the first accounting period beginning after 1 April 2024, you will need to claim R&D via the merged scheme. You should consider the following important changes:
- The different mechanism for calculating relief.
- The new definition of contracted R&D.
- Restrictions on eligible expenditure for overseas externally provided workers (EPWs) and subcontractors.
- The removal of restrictions for subsidised R&D expenditure.
At EKWilliams, we are dedicated to guiding you through the intricacies of the new scheme. Our team is on hand to offer advice and, whenever feasible, handle the process of claiming tax relief on your behalf.
With a proven track record, we pride ourselves on helping R&D-focused SMEs achieve significant tax savings, with our skilled team continuously seeking opportunities for tax reductions and final boosts.
Could your business qualify for R&D relief? We offer a free initial consultation to assess your eligibility, with a ‘no claim, no fee’ policy.
If you are interested in our services or seeking guidance, please contact our Tax Manager, Chris Barlow, for more information at [email protected].