R&D Tax Relief Reform

The UK government is proposing a new R&D tax relief system for small and medium enterprises (SMEs), with the aim of simplifying the current system and boost economic growth.

There are currently two R&D tax relief schemes available to UK businesses. Changes to these will come into force from April 2023, and there are proposals to redesign and overhaul these in the longer term.

An 8-week consultation to gather input for plans to streamline the R&D tax relief system for SMEs by merging the Research and Development Expenditure Credit (RDEC) and SME R&D relief into one scheme.

The consultation, which runs from 13 January to 13 March 2023 and sets out proposals on how a single scheme could be designed and implemented.

The new scheme will provide SME decision makers with clearer information about the relief their business will receive, allowing them to budget for R&D more effectively. Under the current system, SME tax relief amounts are only determined at the end of the accounting period.

This proposal is part of the government's ongoing review of R&D tax reliefs and follows a £20 billion investment in R&D announced at the Autumn Statement 2022.

The government is committed to encouraging more businesses to invest in R&D and believes that simplifying the tax relief system is a key step towards achieving this goal.

The rates of relief for R&D expenditure incurred on or after April 1st, 2023 will experience a considerable change.

Financial Secretary to the Treasury, Victoria Atkins MP, said: "We are focused on growing the economy with thriving businesses bringing more jobs, higher pay, and more tax revenue to fund our precious public services.

Getting R&D tax relief right and fit for the future sits at the heart of making sure the UK remains a competitive location for cutting-edge research - helping new firms grow."

The government is inviting comments from a wide range of sources, including individuals, companies, representative and professional bodies, and especially welcomes feedback from R&D intensive businesses and their representatives.

The new scheme, if implemented, is expected to be in place from April 1st, 2024.