Hot on the heels of the already announced changes to R&D tax relief (more compliance, more detail, restriction to UK activities for subcontractors, SME tax relief rates down, RDEC rates up comes the announcement of a full overhaul to the R&D tax relief regime. On 13 January 2023, the Government published a consultation document asking for comment on (what is hoped to be) their final structural change, to align both the SME and RDEC scheme into one.

The Government’s stated policy is that R&D tax relief is an incentive for companies to undertake more R&D, innovate and therefore increased productivity growth by reducing the overall cost of R&D.  However, their data suggests that whilst historically the R&D tax reliefs are generous in a global context, this has not been reflected by companies investment in R&D which has lagged other countries. Additionally HMRC is also experiencing substantial levels of fraud and error with R&D tax relief claims. The timetable of  these new proposed changes, due to take effect from 1 April 2024 will create further uncertainty around the schemes and may make it difficult to plan forwards. Companies will need to factor in the changes for 2023 as well as proposed changes for 2024 when considering the R&D tax relief claim of the future.