As you may have spotted, Government launched a new consultation on 13th January inviting views on the design of a potential single R&D tax relief scheme (merging the Small/Medium Enterprise (‘SME’) and large company RDEC regimes that exist currently). The proposal is that the new scheme should be an ‘above the line’ RDEC like credit, that might then seek to take the best attributes from each regime. Implementation is proposed for accounting periods starting on or after 1 April 2024 (so 31 March 2025 year ends onwards).
Whilst I suspect this will have a greater impact for SMEs, it would be naive to view this as exclusively an SME matter. Representations from all businesses would be wise to ensure HMRC understands what is most valuable about each regime, to be retained, and what more could be done to further incentivise UK R&D.
In summary:
- One rate of benefit for all is suggested, perhaps with more generous (separate?) support for different types of R&D / more R&D intensive companies (life sciences noted in particular).
- The most controversial area will be the treatment of subcontracting and how to ensure only one company can claim for the R&D. For example, should the customer claim for subcontracted activities, as in the SME scheme, or the subcontractor, the person carrying on the R&D, as in RDEC?
- Questions are also asked about whether qualifying indirect activities influence R&D decision making, whether a minimum claim threshold should be introduced and how best to align the PAYE/NIC caps.
Whilst more change is generally unwelcome, we do see this as an opportunity for simplification if the new regime is well thought through. The correction of anomalies should also be possible.
https://www.gov.uk/government/news/rd-tax-relief-reform-consultation-launched
https://www.gov.uk/government/consultations/rd-tax-reliefs-review-consultation-on-a-single-scheme
Responses are welcome by 13th March 2023 – do get in touch if you would like to discuss how best to input (either directly or via Bright)
