Merging of the two R&D tax credit schemes
The Chancellor confirmed that the merging of the SME and RDEC schemes will go ahead. The new merged scheme will be based on the R&D Expenditure Credit (“RDEC”) scheme. Accounting for the RDEC is complex, but for profitable companies the RDEC benefit equates to tax relief of between £15 and £16.20 for every £100 of qualifying R&D expenditure, with the precise level of benefit dependent on profitability.
A further change was announced yesterday which will mean that loss making companies can benefit at the higher rate above and can claim a cash repayment of £16.20 for every £100 of qualifying R&D expenditure. The implementation of these changes will come into effect for accounting periods commencing on or after 1 April 2024.
There was also “clarification” as to who will claim R&D tax relief when dealing with subcontractors under the new merged scheme. Broadly, it will be the “decision maker company” who asks the third party to do the work for them, rather than the 3rd party themselves, who will be able to claim the R&D tax relief. Whilst this may seem simple enough, in practice the position will frequently be more complex.
