If you claim research and development (R&D) tax relief for your business, it is time to prepare for submitting claims under new schemes that have come into effect.
Applying to accounting periods starting on or after 1 April 2024, the two new schemes are:
- The merged scheme – also known as the “new RDEC” – is for companies of all sizes that are not R&D intensive.
- The Enhanced R&D Support Scheme (ERIS) is for loss-making small and medium-sized enterprises (SMEs) that are R&D intensive – meaning they spend more than 30 per cent of expenditure on R&D.
The aim of bringing in these two schemes is to simplify the R&D tax relief claims process.
However, due to the phased-in nature of these new schemes, there are three “old” schemes still in play:
- The SME scheme.
- The “old” RDEC scheme.
- The R&D Intensive scheme – for loss-making SMEs spending more than 40 per cent of expenditure on R&D.
The R&D Intensive scheme applies to expenditure from 1 April 2023 and accounting periods starting before 1 April 2024.
Although the last claims that can be made through the SME and old RDEC schemes are for accounting periods starting in March 2024, it is possible to amend these claims until February 2027.
This can be very confusing for businesses, who may not know which scheme applies to them.
New guidance for subcontracted and subsidised R&D
There are some clear differences in the new schemes from the old schemes – the biggest of which revolve around subcontracting and subsidised expenditure.
Previously, expenditure incurred by a company in carrying out activities contracted to it by another person was not treated as qualifying expenditure by HMRC.
This intended to prevent both parties from claiming relief for the same activities.
However, this meant that customers were able to claim R&D tax credits while subcontractors were left without vital relief.
Under the new merged scheme, HMRC guidance states that “whether the activities were contracted to the company is a question of fact and each case should be looked at individually.”
Factors to determine this include whether or not R&D was incidental to the contracted work, the degree of autonomy held by the contractor, and Intellectual Property (IP) ownership.
Determining which party is eligible for R&D is likely to be difficult to achieve in practice.
However, the new guidance does recognise the legitimate claim to R&D relief that subcontractors have.
Additionally, grants and subsidies will no longer affect R&D claims under the merged and ERIS schemes.
Preparing for the new schemes
To prepare for the new R&D schemes, make sure you familiarise yourself with the new rules about making claims.
Remember, if you have never submitted a claim before or in the last three years, you will need to notify HMRC in advance of submitting any new claims for R&D tax relief by using an Advanced Notification Form. If this is not submitted, your claim will be rejected.
If you’ve never submitted an R&D claim under the new merged and ERIS schemes, you may be concerned about adapting to the new rules.
At Rotherham Taylor, we have extensive experience in claiming R&D tax relief for businesses like yours across a wide variety of sizes and sectors.
We can help you get to grips with the new schemes, amend claims under the old schemes, and make sure you’re claiming the maximum amount of relief.
