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The new merged R&D expenditure credit regime – how will it impact you?

The merger of the current research and development (R&D) tax relief regime for small and medium sized entities (SMEs) and R&D expenditure credit (RDEC) regime for large companies was confirmed in the chancellor’s Autumn Statement 2023. The merged regime takes effect for accounting periods beginning on or after 1 April 2024 and for many claimants this could significantly impact their future R&D tax relief claims.

This article outlines the key changes and explores whether the impact may be positive or negative, depending on a company’s particular circumstances.

Key changes

There are a large number of changes in the new merged regime. The most significant are outlined below.

Reasons to be cheerful

Reasons to be concerned

Summary

Overall, the new regime appears to shift the balance towards large companies at the expense of SMEs. This may initially seem like a strange government policy choice, but perhaps reflects HMRC’s current views on the level of fraud and error in the SME regime.

There will be specific fact patterns that mean some businesses gain or lose disproportionately and therefore all companies should look at their own situation and assess the potential impacts, noting that for some claimants there will be up to two more accounting periods to apply the existing rules before the above changes impact claims.

For more information, please get in touch with Graham Steele or your usual RSM contact.

authors:graham-steele