Webinar recording: Research and development (R&D) tax – how is the regime changing?

17 January 2023 / Insight posted in Enterprise series

In this session, our experts discussed how the upcoming changes to the R&D tax regime will affect businesses. There is beneficial action you can take now including changing your year end to ensure you maximise the period you can claim for under the current regime and looking at your overseas expenditure. Read our experts top tips on preparing for the upcoming changes.

There was particular interest from the audience to understand the new rules on overseas expenditure. For accounting periods beginning on or after 1 April 2023, expenditure on subcontracted R&D and the cost of externally provided workers (EPWs) employed on R&D projects outside the UK will no longer be eligible for UK R&D tax relief. It must either be attributable to relevant R&D undertaken in the UK or otherwise be qualifying overseas expenditure. Read our article on overseas R&D tax relief changes and what they mean for your business.

Our specialist team are available to help you make a claim. If you would like us to run a no-obligation calculation to see if your R&D activity qualifies and how much you might be eligible to claim, please contact us.

R&D tax reliefs review: consultation on a single scheme

On Friday 13 January the Government issued a consultation document, seeking comments on the proposed transition to a single R&D tax relief scheme. As discussed in the webinar, in his Autumn Statement 2022 the Chancellor said that he was looking to simplify things and move towards one regime. The preferred route is to end up with a single scheme modelled on the existing RDEC (R&D Expenditure Credit) scheme typically used by larger businesses, i.e., a grant-based scheme payable at the same level regardless of the profitability of the claimant. It is proposed to make the new scheme effective for expenditure incurred from 1 April 2024.

The Government has not said at what level it expects to set the benefit. It has however said that the amount of the benefit will not be consulted on, with the figure to be announced before 1 April 2024.  The level of the RDEC has recently increased to a net benefit of 15% (for a 25% taxpayer from 1 April 2023), we would therefore expect the newly proposed scheme to provide at least this level of benefit.

While there is a lot of detail still to be worked out, the general thrust towards a single simpler scheme is to be welcomed. It is of course the Government’s decision to set the benefit at whichever level it chooses, but we would strongly recommend that the scheme remains highly competitive compared to R&D regimes in other countries.

Moore Kingston Smith will be responding to this consultation in due course and would welcome any feedback from our clients.

Check the government’s website for further details of the consultation can be found.

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