In early January 2023, the UK government launched a consultation to simplify the R&D tax relief system, help drive innovation and grow the economy. The government says that it would like to hear from a wide range of sources including individuals, companies, representatives, and professional bodies, but especially invite comments from research and development-intensive businesses and those representing them (that’s us!).
The 8-week consultation will run from the 13th of January to the 13th of March 2023 and will set out proposals on how a single scheme could be designed and implemented. The desired single scheme would replace the two R&D tax relief schemes currently in place – the Research and Development Expenditure Credit (RDEC) and the Small and Medium Enterprises (SME) R&D relief.
This new scheme would be modelled on the current RDEC scheme but adjusted to also suit SMEs, which would give decision-makers in smaller companies clearer information that can help them set budgets for R&D. This contrasts with the current SME scheme, where the exact amount of money a firm will receive can only be known with certainty at the end of the accounting period.
The UK’s R&D tax reliefs play a significant role in encouraging businesses to invest in R&D, helping them to grow and create the technologies, products, and services which reshape lives and livelihoods.
These proposed changes are part of the government’s ongoing R&D tax relief review and follow on from changes announced in the 2022 Autumn Statement where the generosities of the two existing schemes were broadly aligned.
If implemented, the new scheme is expected to be in place from the 1st of April 2024.