The policy paper accompanying the Spring Budget notes that HMRC will establish an expert advisory panel to support the administration of R&D reliefs, in order to improve the functioning of the R&D tax reliefs system. The aim is that the panel will provide insights into the cutting-edge R&D occurring across key sectors, and work with HMRC to review relevant guidance, ensuring it remains up to date and provides clarity to claimants. Those companies claiming or wanting to claim R&D relief will surely appreciate clarity given the recent multiple changes to the R&D regime.
To recap on changes to the R&D regime for companies with accounting periods commencing on or after 1 April 2024;
All companies (with the exception of loss making “SME R&D intensive companies”) will get tax relief at a headline rate of 20% of qualifying R&D expenditure. This is known as an “Above the line” (ATL) scheme. Relief will be reduced by a “notional tax” charge based on the company’s applicable tax rate (if profit making) or at a flat 19% if loss making. Any “notional tax” retained can be carried forward as a credit against the company’s next available corporation tax liability (subject to having a PAYE/NIC liability equal to or more than the tax credit). The current complexities around grant funding, subsidised expenditure and contracted R&D will be removed to simplify the claims and so that tax relief is not reduced.
Loss making “SME R&D intensive companies” are subject to a different R&D regime. A company with an accounting period starting on or after 1 April 2024 needs to have qualifying R&D spend worth at least 30% of its total expenditure to be classed as an “intensive SME”. Loss making intense SME companies can claim £27 from HMRC for every £100 of R&D investment (calculated as an 86% uplift on spend x 14.5% “cash back”), instead of being in the ATL scheme.
Please click here to go back to our full Spring Budget 2024 analysis.
