R&D Tax Relief Reform consultation launched

The Government has launched a consultation to streamline the UK’s two R&D tax relief systems into one scheme from 1 April 2024 .

The 8-week consultation, which runs from 13 January to 13 March 2023, sets out proposals on how a single scheme could be designed and implemented.

As the consultation ends just two days before the Budget on 15 March 2023, it is very unlikely we will see any major announcements then - more likely to be in the Autumn Statement.

It is proposed that a single R&D scheme would replace the two current R&D tax relief schemes:

• the Research and Development Expenditure Credit (RDEC) and
• the small and medium enterprises (SME) R&D relief.

This is part of the government’s ongoing R&D tax reliefs review, and follows changes announced at Autumn Statement 2022 where the reliefs available under the two R&D tax schemes were broadly aligned, with the Chancellor pledging to work with industry to understand how to provide further support for R&D intensive SMEs.

From 1 April 2023:

• the RDEC rate will be increased to 20% from 13%,
• the SME deduction rate will be reduced to 86% from 130%, and
• the SME credit rate decreased to 10% from 14.5%

The UK’s R&D tax reliefs have an important role to play in encouraging more businesses to invest in R&D, helping them to grow and create the technologies, products and services.

The government says reform to the R&D tax relief rates rates will be challenging for some R&D intensive SME companies and those in the life sciences sector in particular.

If implemented, the new single scheme is expected to be in place from 1 April 2024.

See: R&D Tax Reliefs Review: Consultation on a single scheme

R&D changes from 1 April 2023

As well as the above consultation and ahead of major changes to the R&D tax reliefs regime in April 2023, new guidance was issued in December 2022 on which comments are invited up to 28 February 2023.

We have previously highlighted the key changes in our earlier articles:

• R&D Tax Credit changes - good news and bad news
• Upcoming R&D Tax Relief changes

Further information

If you want to find out more about R&D Tax Relief and how this can benefit your business, head over to our R&D KnowledgeHub or contact a member of our R&D team.