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Merging R&D Schemes: What Changes in 2024

We’re diving into some exciting developments in Research and Development (R&D) tax schemes. Get ready to explore the changes shaking things up in 2024 and how they might impact your business. Let’s delve into the details.

A New Era for R&D Tax Relief

The Autumn Statement 2023 dropped significant news for businesses engaged in R&D activities. One of the biggest announcements was the merger of the Small or Medium Enterprise (SME) scheme and the Research and Development Expenditure Credit (RDEC) scheme. This change kicks in from the 1st of April 2024 for accounting periods and aims to make life easier for businesses like yours when seeking R&D tax relief.

The Two Schemes: What You Need to Know

With the merger in full swing, here are the two options that businesses have:

  • The Merged Scheme: Think of this as the all-in-one package deal. With elements from both the SME and RDEC schemes, it’s your go-to for claiming R&D tax relief in a streamlined way.
  • Enhanced Relief for Loss-making R&D Intensive SMEs: This one’s tailored for R&D pros. If your business is about pushing boundaries in research and development, this scheme’s the one for you. Plus, it gives extra relief for those whose R&D game makes up a big chunk (30% or more) of their spending.

Consistency in Contracted-Out R&D

To ensure everything is fair across the board there are some new rules in place. Now, when figuring out who can claim relief for R&D work, there’s a clear set of guidelines for both customers and contractors. These rules kick in for accounting periods starting on or after the 1st of April, 2024, bringing some much-needed clarity and consistency to the whole process. It’s all about making sure everyone’s on the same page.

Subsidised Expenditure: Streamlining the Process

With these fresh contracted-out R&D rules in play, some old rules about subsidised expenditure in the SME scheme aren’t as important anymore. As a result, they’ve taken those sections right out of the legislation for the merged scheme, simplifying the process for businesses wanting R&D tax relief.

Enhanced Tax Relief for R&D Intensive SMEs: A Lower Threshold and Grace Period

Starting from the 1st of April, 2024 the bar for qualifying as an R&D-intensive SME will be lowered from 40% to 30% of total expenditure. Plus, there’s a one-year grace period to help businesses transition smoothly to the new threshold requirements. This adjustment provides added flexibility while maintaining the focus on encouraging innovation.

Claiming the Enhanced Rate: Revised Forms and Procedures

From the 1st of April, 2024, an extra revamped information form will be available for businesses wanting to claim the improved SME rates. This form, which will streamline the process for submitting claims under the SME-intensive scheme, will be accessible after the Finance Bill receives Royal Assent.

Limiting Nominations and Transfers: Payments Go Straight to Your Company

From the 1st of April, 2024, HMRC will send R&D tax credits directly to the company making the claim, where the company will need to provide their payment details. There are some exceptions, though; if you want the payment sent to someone connected to your company, you’ll need to explain how they’re connected. 

Cancelling New Assignments: Making Sure Things Are Fair and Clear

To make things fair and transparent, any new deals to transfer R&D tax credit payments after the 22nd of November, 2023, won’t count once the Autumn Finance Bill becomes law. But if the deal was completed before that date it’s fine. HMRC will still accept nominations for claims made before the 1st of April, 2024, keeping everything straightforward and consistent.

Embracing Change for a Brighter Future

In a nutshell, prepare for some exciting shifts in the world of R&D tax schemes, set to shake things up for businesses in 2024 and beyond. With the merger of the SME and RDEC schemes, claiming R&D tax relief should be much smoother. Businesses now have two main options, the Merged Scheme and Enhanced Relief for Loss-making R&D Intensive SMEs, both geared towards sparking innovation while simplifying the process. Also, revised forms and procedures and direct payments to companies making a claim aim to improve business efficiency and transparency. While changes are underway, the goal to create an innovative and successful environment is clear. So, embrace these changes, stay informed, and continue pushing the boundaries.

Ask for Help

If you want to make the most of these R&D tax relief changes but are unsure where to start, give us a call on 01603 630882 or fill out our online form, and we’ll be happy to help.