The UK’s research and development tax relief schemes have been seen by many innovative companies as a valuable tax initiative. Over the last few years there have been a number of changes to the two schemes and the Government has just announced 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 companies’ investment in R&D which has lagged behind that of other countries. Additionally, HMRC is also experiencing substantial levels of fraud and error with claims for R&D tax relief. 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 for businesses 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 consultation runs to 13 March 2023 and sets out proposals on how a single scheme could be designed and implemented.
This would replace the two R&D tax relief schemes currently in place – the Research and Development Expenditure Credit scheme and the small and medium enterprises R&D relief.
