The new merged R&D Tax Relief Scheme will come into effect on 1 April 2024

Major changes to the R&D Tax Relief Scheme announced in The Autumn Statement 2023 will shortly come into effect. At this point, it’s worth revisiting the changes to consider how they will impact claimants and what taxpayers should do be doing to prepare for the new financial year. Navigating major regulatory change can be challenging, but particularly for complicated areas of tax like R&D tax relief. Contact our R&D tax specialists if you have any questions regarding the below changes.

  • The new R&D Tax Relief Scheme unifying SME and RDEC regimes will be effective for accounting periods beginning on or after 1 April 2024.
  • Clarity on contracted out R&D – the merged scheme will now allow both large and SME businesses that initiate and contract out R&D project work to claim for contracted-out R&D costs. Under the RDEC scheme, large companies were previously unable to claim for subcontracted costs.
  • The changes to contracted out R&D make legacy restrictions around subsidised expenditure obsolete. Large and SME businesses that are beneficiaries of grant funding for specific R&D projects will be able to claim for project costs through the merged scheme.
  • From 1 April 2024, businesses will be unable to claim for overseas subcontracted expenditure unless the necessity to use non-UK resources is due to environmental, social, or geographical limitations in the UK. How HMRC intends to align this restriction with those imposed on Externally Provider Workers (EPWs) will be outlined in the final legislation.
  • The merged scheme will adopt the more generous PAYE and NIC cap currently applied to the SME scheme (£20,000 plus 300% of total PAYE and NIC liability for the claim period).
  • The SME scheme lives on for loss-making ‘R&D intensive SMEs’. Businesses that spend over 30% of their total spending on qualifying R&D expenditure within an accounting period will qualify for an enhanced deduction of 86% and a repayable credit of 14.5%.
  • The government has banned the use of nominations for R&D tax credit payments which will stop payments being made to third parties, with the payments going directly to claimants.
  • A detailed overview of the above changes is available in our Autumn Statement 2023.

We expect the government to make additional announcements prior to the launch of the merged scheme on 1 April 2024 which we’ll cover in our blog when new information becomes available. The new merged scheme represents a significant change to the R&D tax regime in a very short timeframe so it’s important your business prepares ahead of time. If you have questions about the changes, please contact our tax experts on 0161 904 0044 or team@costcare.co.uk.

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We have referred tens of clients to Cost Care Tax over the past 7/8 years and all have been impressed with the professionalism and efficiency of their team. The support in relation to R&D tax claims is unrivalled and exceptional and we highly recommend them. Thanks to Wayne, Paul, Tom, Ben and the rest of the team
Even as a small business (10 employees), we spend significant amounts on R&D projects both in time and materials. Cost Care Tax has managed our R&D Tax Credit claims for the past 7 years, and in that time we’ve found their professional approach has made the process rewarding, straightforward, and painless.
Cost Care Tax has always been there to help us understand what is claimable and what isn’t, and provide us with an easy to use document for recording R&D projects. The submission reports they write are very thorough, and once approved by us they deal directly with our accounts in submitting the claim to HMRC.
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As a smaller contractor we can rarely afford the time nor the internal personnel to carry out the abundance of R&D paperwork involved in tax credits. Cost Care Tax takes that pressure away and carries the burden both with complete care and within a decent time frame.

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