If you haven’t submitted an R&D tax relief claim under the new merged scheme, it is time to start preparing, because you will soon.
Two new schemes have come into effect, since they apply to accounting periods starting on or after 1 April 2024.
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:
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 means that R&D tax advisors need to maintain their knowledge of these two schemes until early 2027.
The R&D Intensive scheme applies to expenditure from 1 April 2023 and accounting periods starting before 1 April 2024.
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, in certain circumstances expenditure incurred by a company in carrying out activities contracted to it by another person was not treated as qualifying expenditure by HMRC.
This is intended to prevent both parties from claiming relief for the same activities.
However, this meant that some companies 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
If you’ve never prepared an R&D claim under the new merged and ERIS schemes, you may be concerned about adapting to the new rules.
At Brown Butler, we have extensive experience in claiming R&D tax relief for companies across a wide variety of sizes and sectors.
We can help you get to grips with the new schemes, support you with amending claims under the old schemes, and make sure you’re claiming the maximum amount of relief for your clients.
For further guidance on the new merged and ERIS schemes, contact our R&D tax relief specialists today.
