If your company undertakes research and development (R&D) you will usually benefit from generous tax relief.
HMRC has published draft legislation for a new merged R&D scheme which would unify the existing R&D expenditure credit (RDEC) which currently applies to large companies and the small or medium entity (SME) relief schemes.
The merged scheme will offer a taxable credit based on a percentage of R&D expenditure. This will be at 20% in line with the recent increase in the RDEC credit from 13% to 20%.
Under the current RDEC scheme, services contracted out to another individual or company do not attract relief except in very limited circumstances. The draft legislation allows for a more generous approach to subcontracting, closer to the SME rules.
According to the draft legislation, expenditure will not qualify for relief if the R&D project is subsidised in any form. This could have significant consequences for many research entities who rely heavily on grants.
The legislation is currently in draft form with an announcement anticipated in the Autumn statement and changes expected to come into force from April 2024. It is likely that the changes will have significant implications for most if not all businesses involved in R&D so taxpayers should start preparing for the proposed changes as soon as possible. We can help you work out what the changes could mean for you.