SearchAutumn Statement: R&D Changes
In last Wednesday’s Autumn Statement the Chancellor confirmed that the proposed merged R&D scheme that was announced earlier in the year will come into effect for accounting periods beginning on or after 1 April 2024. The new merged scheme has been touted as a significant tax simplification, although the more cynical among us might view it as an excuse to reduce the rate of R&D tax relief.
It had previously been announced that under the new merged R&D scheme the effective tax saving will typically be 15% of the cost of the qualifying R&D expenditure, which is significantly lower than if your company has until now been claiming R&D relief under the very generous SME R&D scheme. That said, the Chancellor did announce that if your company is loss making the rate of relief under the new merged scheme will increase to 16.2% rather than the 15% rate for profit making companies.
At odds with the Government’s decision to simplify R&D relief by bringing in a single merged scheme, it had already been announced that loss making R&D intensive companies could continue to claim R&D relief under the ‘old’ SME R&D scheme. The threshold to qualify as R&D intensive was going to be at least 40% of a company’s total relevant expenditure for the accounting period must be spent on qualifying R&D activities. The Chancellor announced on Wednesday that this ‘intensity threshold’ would be reduced from 40% to 30% for accounting periods beginning on or after 1 April 2024. This was coupled with a new one-year grace period to allow companies who dip under the 30% threshold to continue to receive the more generous SME R&D relief for one further year following a breach of the 30% threshold.
In some of the small print published following Wednesday’s headline speech it was stated that R&D claimants will no longer be able to nominate a third-party payee for R&D tax credit payments. This will ensure that the R&D claimant company will receive the R&D tax credit directly and prevent some of the more aggressive R&D firms from using their own bank details for the R&D repayment and only passing on the R&D repayment to the claimant company after deduction of their own fees and sometimes after an unnecessary time delay.
It feels like a bit of a stretch to call all the recent changes to R&D tax relief ‘simplification’, so if you have any questions about how changes might impact your business please get in touch.