R&D – Seismic change is on the way

The R&D tax relief landscape is undergoing seismic change as a result of the Government’s ongoing attempts to tackle fraud and abuse in the sector.  This started with the changes to the rates effective from 1 April 2023, continued with the introduction of the mandatory Additional Information Form (AIF) from 8 August 2023, and will […]

The R&D tax relief landscape is undergoing seismic change as a result of the Government’s ongoing attempts to tackle fraud and abuse in the sector.  This started with the changes to the rates effective from 1 April 2023, continued with the introduction of the mandatory Additional Information Form (AIF) from 8 August 2023, and will continue into 2024 with perhaps the biggest change since the inception of the relief in the early 2000s.

There are two key elements to be aware of:

ADVANCE NOTIFICATION

For accounting periods beginning on or after 1 April 2023, companies must advance notify HMRC of their intention to make an R&D claim within 6 months of the year-end. Broadly the requirement is restricted to those companies who have not made a R&D claim before or where this is the first claim in 3 years. Failure to notify removes the right to claim for that accounting period and there is no right of appeal.

The new requirement means that companies should continually monitor their R&D activities from now on in order to protect their right to claim in the future.

SINGLE MERGED SCHEME

A single, merged scheme for R&D relief will replace the SME and RDEC schemes from 1 April 2024.  The aim is to simplify the relief by moving to a single rate (20%) and set of qualifying rules.

It is key to remember that the definition of R&D for tax purposes remains unchanged.

In reality however there will be two schemes that will run in parallel as the enhanced rate for R&D intensive SMEs (introduced from 1 April 2023) will continue to be available under the current SME model. The threshold for R&D intensity has been lowered from 40% to 30%, making more businesses eligible for the enhanced rate.

If you would like to find out if your business may qualify as a R&D intensive company or have any other queries regarding the changes, please get in touch.

If you have any queries on R&D or would like assistance please contact Lucy Lloyd on 01633 653177 or Lucy.Lloyd@kilsbywilliams.com.

Alternatively, please contact your usual advisor on 01633 810081 or email info@kilsbywiliams.com.

 

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