Amongst all the other announcements from the Chancellor in yesterday’s Autumn Budget Statement, there was significant news for the R&D Tax Relief scheme. Jeremy Hunt confirmed that the SME and large company R&D schemes are to be merged for accounting periods beginning on or after 1 April 2024.
Whilst this has come at a time of unprecedented change to the R&D regimes, the delay to the implementation is welcome news for all companies as it was announced previously that the new regime would apply to expenditure from 1 April 2024. Therefore, companies will now have considerably more time to prepare for these changes and there will be no split year treatment to complicate matters.
However, Nonetheless, the merger will likely lead to a reduced rate of benefit for SMEs, who are already adjusting the reductions which took effect from 1 April 2023. If the expected main rate of relief in the new merged scheme remains at 20%, the net tax benefit for claimants could be 15% or 16.2% (for companies making a loss).
On a positive note, R&D-intensive SMEs will benefit from the reduced intensity qualifying threshold, moving from 40% to 30%. This means about 5,000 additional businesses will now be eligible for this category, receiving a net tax benefit of 27%, which is significantly more advantageous than under the new merged scheme.
The Government’s goal was simplification – by merging the regimes into one. However, we will still be left with two (R&D-intensive and the rest) and, taking in to account all the changes announced (and still to be confirmed) many companies will still be unable to plan with certainty given the ever-evolving landscape.
These announcements conclude the Government’s review of R&D Tax Reliefs (launched back in the 2021 Spring Budget). Concerns remain around high levels of non-compliance in claims and HMRC will be publishing a compliance action plan in due course.
R&D tax relief remains an extremely valuable incentive. With Ian Farley you can be confident that your claims will be managed correctly and professionally.
We expect further legislation and guidance before the end of this year, and we will keep you informed as soon as they are available. If you have any questions or concerns about the changes and their impact on your claims, please get in touch with us on 028 9187 1581
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