Yet more change for R&D tax relief – proposed single R&D scheme

Hot on the heels of the already announced changes to R&D tax relief (more compliance, more detail, restriction to UK activities for subcontractors, SME tax relief rates down, RDEC rates up comes the announcement of a full overhaul to the R&D tax relief regime).

On 13 January 2023, the Government published a consultation document asking for comment on (what is hoped to be) their final structural change, to align both the SME and RDEC scheme into one.

The Government’s stated policy is that R&D tax relief is an incentive for companies to undertake more R&D, innovate and therefore increased productivity growth by reducing the overall cost of R&D.  However, their data suggests that whilst historically the R&D tax reliefs are generous in a global context, this has not been reflected by company’s investment in R&D which has lagged other countries. Additionally HMRC is also experiencing substantial levels of fraud and error with R&D tax relief claims.

The timetable of  these new proposed changes, due to take effect from 1 April 2024 will create further uncertainty around the schemes and may make it difficult to plan forwards. Companies will need to factor in the changes for 2023 as well as proposed changes for 2024 when considering the R&D tax relief claim of the future.

The key draft proposals are to simplify and make

• R&D tax relief to be an “Above the line” credit: and
• Remove boundaries around size considerations
• Essentially make the SME scheme more RDEC like.

There are various practical considerations in merging the scheme and these are addressed in the consultation document which invites comments from anyone potentially affected or interested.

These include collecting views on

• A proposed single scheme – both positive and negative
• How to align the treatment of subcontractin
• Experiences of the PAYE/NIC cap
• Sector specific enhanced reliefs
• Timing of the merging and support to companies for the transition
• Minimum threshold for R&D

Please click here to view document.

Genuine R&D companies, performing ground breaking science and technological innovations appear to be penalised by those abusing the system, even though the Government says “Science and innovation are some of the UK’s greatest strengths”.

There is a real risk that R&D companies will no longer consider the UK’s tax regime an attractive proposition for conducting R&D and base themselves elsewhere.

 

Have your say at our R&D Tax Relief Consulation Discussion

As part of our commitment to support the technological community, we are organising a virtual discussion meeting to share knowledge and views on this Consultation Document. This will frame our response to Government. Alternatively, if you want to respond directly then send your comments to RDTaxReliefs@hmtreasury.gov.uk by 13 March 2023.

Please join us for a Zoom meeting on Wednesday 1st March 2023 at 2pm - 3pm.

Meeting Agenda:

• Brief update on recent changes to R&D tax relief schemes
• Introduce the proposals in the Consultation Document
• Share and discussion of your views on the questions for which responses are required.

Please click here to register.

 

For further information on any of the earlier webinars, please watch our earlier webinars on all the changes announced here.

For any discussions or concerns around R&D tax relief contact your usual tax adviser or Margaret Savory.