22Nov
As we dissect the highlights of the Autumn Statement 2023, a pivotal shift in the R&D tax landscape has been confirmed, bringing both opportunities and considerations for businesses engaged in research and development activities.
Here's a concise breakdown of the key takeaways and their potential impact:
1. Merging of R&D Tax Reliefs:
- Effective Date: Expenditure incurred in accounting periods beginning on or after 1 April 2024 will be claimable under the merged scheme.
- Rate: The merged scheme adopts the current RDEC rate of 20%.
- Notional Tax Rate for Loss-Makers: Set at the small profits rate of 19%, rather than the current 25% main rate.
- Guidance and Clarification: Expect forthcoming guidance to differentiate between contracted R&D and R&D activities versus contracted services, preventing dual claims for the same cost/activities.
- SME Rules: The restrictions on relief for subsidised project expenditure by SMEs have been removed.
- Overseas Expenditure: Restrictions will apply for accounting periods starting on or after 1 April 2024. Certain qualifying activities that have to be undertaken overseas will continue to be claimable but the cost of the work, and availability of workers, are specifically excluded as factors.
2. Additional Tax Relief for R&D Intensive Loss-Making SMEs:
- Intensity Threshold Reduction: Lowered from 40% to 30%.
- Grace Period: A one-year grace period was introduced for companies dipping below the 30% qualifying R&D expenditure threshold.
- Effective Date: Changes in intensity threshold and grace period apply for accounting periods beginning on or after 1 April 2024.
3. Removing Nominations and Voiding Assignments:
- Effective Date: From 1 April 2024, companies can no longer nominate a third-party payee for R&D tax credit payments (with limited exceptions). No new assignments of R&D tax credits to third parties are possible from 22 November 2023.
4. Closing the R&D Review:
- The government concludes its review with the announcement of the merged scheme.
- Future Actions: Anticipate HMRC's compliance action plan to address non-compliance levels. Collaboration with the industry for enhanced support for R&D-intensive SMEs and potential simplifications will continue.
As the R&D tax landscape evolves, staying informed and adapting strategies will be crucial. Contact us to explore how these changes can optimise your R&D claims and position your company for success.
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