How does the newly merged R&D Expenditure Credit scheme affect large companies?
In the changing landscape of corporate taxation and incentives, staying updated on regulatory changes is crucial for large companies. The recently implemented merged R&D Expenditure Credit (RDEC) scheme is a significant development that businesses need to understand to maximise their benefits.
The new merged R&D Expenditure Credit (RDEC) scheme, which came into force on 1 April 2024, brought a number of changes. One of the changes that affects large companies is the change in approach to contracted-out R&D, i.e., projects involving two or more parties.
What’s changed?
- Reward shift: Generally, the new merged scheme rewards the ‘customer’ who commissions R&D.
- Contemplation and intention: However, if the customer had not ‘contemplated or intended’ R&D to occur, or if a contractor ‘discovers’ that R&D is subsequently required. They, as the performer of the R&D, may claim R&D credits.
- Impact on businesses: This change significantly impacts larger companies, as previously, it was often the contractor performing the R&D that benefited, not the customer who commissioned it. Businesses that previously benefited from R&D relief may no longer qualify (if the R&D they perform is contracted to them by customers). In contrast, businesses that previously could not make claims may now be able to (if they commission R&D but contract it out for others to perform).
Determining who receives the credits for projects involving two or more parties has become more nuanced, resting on the contemplation/intention of the customer. The updated HMRC guidelines include 34 example scenarios, reflecting the importance of understanding the specifics of each case.
How we can help
Our R&D team is here to help you navigate these changes. Reach out to us today to ensure your business maximises its R&D credits under the new RDEC scheme.
