Simplification of R&D tax reliefs announced but is it enough for SMEs?
At the 2021 Spring Budget, the government launched a review of R&D tax reliefs to ensure they offered continued international competitiveness as well as tightening the compliance requirements, in the face of concerns over perceived abuse.
The central proposal at that time was the likely merger of the two existing schemes (for small /medium sized enterprises and larger companies) into one new merged scheme which today has been confirmed with effect from 1 April 2024. Whilst, as expected, the measure provides simplification, the new merged scheme is largely based on the less generous larger companies’ predecessor to the detriment of smaller and medium-sized businesses (SMEs).
However, as an acknowledgment of that, and to help support loss making SMEs and R&D intensive companies, further relaxations have been announced. Loss makers in the merged scheme will benefit from a lowering in their notional tax charge from 25% to 19%, and the threshold for additional support for highly R&D intensive businesses will be lowered to those spending 30% of their total expenditure on R&D qualifying activity, instead of the previous 40% qualifying requirement, therefore, bringing more companies into scope for higher payable credit rates.
These announcements have been welcomed by many in the UK’s tech industry, however, there are still concerns as to whether this is enough for SMEs to access the funds they need to develop.
If you are affected by any of these measures and would like to discuss the options available to you in more detail, please do not hesitate to contact us.