On Tuesday 18 July the Government released the draft legislation on the proposed changes to the UK Research & Development (R&D) regimes. Alongside this, HMRC have also released their new approach on R&D compliance taking into account their recent revised estimates on the cost of error and fraud within R&D claims and the focus to reduce this.
R&D tax incentives remain a key mechanism to provide funding for innovation. HMRC have been under pressure to simplify the regimes, as well as reduce the perceived cost of error and fraud within claims. The announcement of the potential move to a merged regime for both SMEs and Large businesses is aligned to HMRC’s aim to simplify - though in practice is likely to create additional complexity for some businesses, such as those whose R&D includes overseas collaboration.
The key highlights are:
It is important that businesses understand how these changes will impact their claims and R&D budgets going forward, particularly given the significant changes to the process for making claims.
We have set out further detail below and will share further insights as we test how these will apply in practice. Please let your usual R&D team know if you have any immediate questions or thoughts on the changes.
Research & Development Expenditure Credit (RDEC) for all - merging the SME and RDEC regimes - Proposed introduction from 1 April 2024
