Merged R&D scheme – what you need to know
The merged R&D tax credit program was confirmed in the Autumn Statement in 2023 and has been introduced for accounting cycles beginning on or following April 1, 2024. The new program signifies a major shift to R&D tax incentives in a very short timeframe, so it’s crucial that your business understands how the merged program will impact your R&D tax applications going forward.
As the UK’s leading R&D tax consultancy, Hamilton Wood & Company is in the ideal place to provide forward-thinking actionable guidance tailored to your business. We have engaged with every R&D consultation and always shown our dedication to championing innovative businesses. Let us support you today.
What is the merged R&D program?
The merged R&D scheme sees two of the UK’s current R&D tax relief incentives merged into a single program:
Increased tax relief and payable refunds for eligible SME costs.
R&D cost credit (RDEC) for large businesses, SME vendors and subsidised R&D expenditure.
The merged program is sometimes referred to as the R&D single program, simplified scheme or new RDEC. The merged scheme has been put in place in a similar way to the existing RDEC scheme with a few notable distinctions.
Who is affected by the merged R&D scheme?
If you’re claiming R&D tax relief, it is probable that you will be affected by the implementation of the merged program.
Despite the aim to simplify R&D tax relief by merging the former SME and RDEC schemes, there are still variations you should note depending on the kind of company you are and the agreements under which you’re carrying out R&D.
If you’re an SME, you must determine whether you qualify for the R&D intensive program or the merged program. Remember to be categorized as an SME for R&D tax purposes you must have fewer than 500 staff and either a turnover of no more than €100 million or gross assets of no more than €86 million.
You will also have to consider whether the decision to carry out R&D Tax Credit Example Near Me sits within your company or elsewhere in the supply chain. Generally, firms will not be able to make a claim if R&D has been outsourced to them.
To learn more about the changes specific to you, check the links below.
Are you:
An SME with under 30% of total costs on qualifying R&D (the cutoff to qualify for an enhanced rate for R&D intensive SMEs).
An SME vendor OR SME WITH subsidized R&D currently claiming under RDEC. Note the handling has changed under the merged scheme.
A deficit-running R&D INTENSIVE SME with over 30% of total costs on qualifying R&D.
A big firm with 500 or more employees and either more than €100 million turnover or €86 million gross assets.
Why was the merged R&D scheme implemented?
The government’s intention with R&D tax incentives is to encourage private investment in innovation to enhance the UK economy’s growth and productivity. A series of adjustments to R&D tax reliefs have been implemented since 2021 with the goal of making the incentive easier and preventing misuse. The merged program represents both the newest adjustment and the conclusion of this consultation phase.
When did the merged R&D scheme come into force?
The merged scheme for R&D tax relief applies for accounting periods starting from or following 1 April 2024. It’s crucial to understand that this is not for costs incurred from the start of April as previously proposed.
So a business that makes accounts to 31 December each year will join the merged scheme for the first time when considering an R&D claim for its accounting period ending 31 December 2025, whereas one which makes up accounts to March will join for its 31 March 2025 period.
The transition for businesses is streamlined with no need to claim under different regimes for an accounting cycle that straddles 1 April 2024. The start date means that implementation of the merged scheme for some businesses will be delayed beyond earlier plans.
