New proposed R&D Tax Relief legislation

Draft legislation published yesterday revealed more details regarding the merger of the current SME scheme and RDEC scheme into a new single scheme for R&D tax relief for accounting periods beginning on or after 1 April 2024.

It is important to note that, at this point, the government is keeping its options open regarding any changes, and there will now be a period of technical consultation. No final decision has been made on this, and the mechanics of this proposal can change at any time.

The main features of the proposal at present are as follows

1. A single R&D relief for the majority of companies, delivered as an expenditure credit. This is proposed to be paid at a flat 20% gross credit. This is subject to corporation tax, and so it would deliver a net credit of 15% to companies. The legislation allows this rate to change at any time.
2. For loss-making R&D intensive SME companies (those spending more than 40% expenditure on R&D), it is proposed that the enhanced rates will still be claimable after 1 April 2024 (although this would seem to contradict the wish to simplify to only one scheme).
3. The proposal contains the already published restrictions on overseas expenditure on subcontractors and EPWs. This means that qualifying overseas expenditure is only that which is undertaken overseas due to geographical, environmental, or social conditions not present or replicable in the UK.
4. It is proposed that all companies will be able to claim UK-based subcontractors, whether they are SMEs or Large Companies. However, no claim for an R&D expenditure credit can be made if the claimant company is subcontracted by another UK-based company.
5. It is proposed that no claim for an R&D expenditure credit can be made for costs which are subsidised, for example, by a grant.
6. There are proposed changes to claiming EPW costs to restrict this to 65% of the staff providers’ relevant staff costs, rather than just 65% of the payment a company makes to the staff provider. Our opinion is that this won’t be workable as staff providers won’t disclose their payroll information to companies, so this will likely be changed.
7. It is proposed that the PAYE/NIC cap by which a credit can be restricted will adopt the more generous SME cap rules.

Further announcements are expected at a future fiscal event, and we will, of course, be following these closely.

How can Visiativ help you?

The current ever-changing R&D landscape must be confusing for companies, and therefore, now is the time to seek professional help in relation to claims.

You can be confident that Visiativ has the experience, resources and expertise to support you through these changes with the end goal of a robust, accurate and comprehensive claim. If you have any questions or would like to share your views and comments on the above proposed changes to the scheme, please get in touch. We’d be happy to discuss your situation and provide advice tailored to your needs.