Following a whole range of reforms already announced in last November’s Autumn Statement, HMRC is now consulting on ways to simplify the UK’s R&D tax schemes.
In particular, the proposal is for a single R&D scheme – for all sizes of company – based on the Research and Development Expenditure Credit (RDEC) currently applied to large companies and SMEs carrying out grant-funded or subcontract R&D.
In other words, the SME scheme which has been in place since 2000 would be replaced, possibly from 1 April 2024.
A number of areas are being consulted on:
- Whether the new scheme should be an “above the line” credit like the current RDEC, enabling it to be accounted for in pre-tax profits and taxed similar to an R&D grant.
- What alternative schemes might be adopted.
- Whether to provide more generous support to more R&D intensive companies.
- Whether there should be a minimum expenditure level.
- How subcontracting should be dealt with (a major differentiator between the current SME and RDEC schemes).
- Simplification of the PAYE/NIC cap.
Any new scheme may come into effect as early as 1 April 2024, so coming on top of the reduction in the rate of the R&D tax credit and the introduction of various compliance measures from 1 April this year, it’s clear that the R&D tax claim landscape is going to look very different in just over 12 months’ time.
We’d love to hear your thoughts on the proposed changes so please do get in touch if you want to discuss them or indeed any aspect of your R&D tax claim.