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The new merged R&D tax relief scheme came into effect for accounting periods beginning on or after 1 April 2024, following confirmation in the Autumn Statement 2023. It marks a major shift in the UK’s R&D tax landscape.
If your company carries out R&D and claims relief, it’s crucial to understand what this change means for you, how it impacts your eligibility, and how to plan ahead.
What is the Merged Scheme?
The merged scheme combines elements of the two previous R&D tax incentives into a single scheme:
- The SME scheme, offering enhanced deductions and payable credits
- The R&D expenditure credit (RDEC), used by large companies and SMEs ineligible under the SME scheme due to funding or subcontracting arrangements
While the merged scheme is structurally based on RDEC, it incorporates several key features from the SME model.
If your company currently claims R&D tax relief, it’s highly likely you’ll be affected by the introduction of the merged scheme.
Although the scheme was intended to simplify R&D incentives by combining the SME and RDEC schemes, the merged framework still requires businesses to assess their eligibility carefully; particularly based on company size and whether they are undertaking contracted out R&D activities.
SMEs will need to determine whether they fall under the merged scheme or continue to qualify for the enhanced R&D intensive support (ERIS).
It’s also critical to establish who made the decision to carry out the R&D and bears the risk. Generally, companies performing R&D under contract for another business will no longer be eligible to claim relief themselves under the merged scheme. However, this is a complex and subjective area that requires the contractual arrangement and wider surrounding circumstances to be considered to ensure determinations have been thought through and appropriately documented.
Are you:
- An SME spending less than 30% of total expenditure on R&D?
- An SME subcontractor or one with subsidised R&D currently claiming under RDEC?
- A loss-making, R&D intensive SME spending over 30% on qualifying R&D?
- A large company with over 500 staff and above-threshold turnover or assets?
If so, the rules have changed – and your approach to R&D claims may need to as well.
The government introduced the merged R&D scheme to improve the targeting of the reliefs to support R&D expenditure, aiming to simplify and improve the system and to drive innovation in the UK. Since 2021, a series of reforms have been made to R&D tax reliefs, aimed at simplifying the system and tackling non-compliance and abuse. The merged scheme is the final outcome of that reform process, bringing previous consultations to a close applying a single set of qualifying rules for most businesses.
Need support with your R&D claim?
Our specialist innovations team is here to help. We’ll assess your eligibility, guide you through the calculation, and ensure your claim is robust and timely.