Have your say in the R&D tax relief consultation

Have your say in the R&D tax relief consultation

Following some proposed changes in last year’s Autumn Statement, there is another Government consultation underway for the UK’s research & development (R&D) tax relief system. This consultation runs until 1 March 2024 and we will be participating in the process.

If you have a view and would like to provide a comment, please complete our short survey here. This survey should only take a couple of minutes of your time and ensure any of your views are taken into account for our submission.

What’s proposed?

In November 2023, the Government announced that there would be new legislation introduced for contracted-out R&D activities and new rules regarding the amount of contractor payments for R&D that can qualify for tax relief where the activity is taking place overseas. Both of these changes are proposed to be applied for accounting periods starting on or after 1 April 2024.

The proposed changes being consulted on are explored in more detail below.

Contracted-out R&D

Currently, claims can be made by the contractor that is undertaking the R&D.

Under the new rules, the entity that has planned, initiated and provided funding for the R&D will be able to make the claim. There are still some scenarios which will allow contractors to claim relief, specifically in situations where the contractor does R&D of their own volition, without being asked to do so by the customer.

Overseas claims

Overseas sub-contractors will only be able to make a claim where the conditions needed for the R&D are non-existent in the UK and it would be unreasonable to copy them. In situations where the R&D is carried out partially in the UK, R&D costs can be split between the UK and overseas.

Contracted-out R&D payments, and payments for Externally Provided Workers (EPWs) who do not make UK PAYE/ National Insurance Contributions (NICs) will still be able to claim R&D relief if the following three circumstances are met:

1. The conditions needed for the R&D are not available in the UK.
2. The conditions can be found in the location where the R&D is carried out.
3. It would be unreasonable for the company to copy the conditions in the UK.

Submit your views

We are determined to provide a platform for businesses to have their say. Please submit your views and any comments through our survey, which is accessible here.

A reminder of what other R&D scheme changes have been implemented

As of 8 August 2023, new administrative regulations have been in place requiring businesses who are submitting R&D tax relief claims to provide much more information than previously. This includes additional information forms breaking the costs down across qualifying categories, listing projects, providing a detailed description of the R&D, and describing what advances in scientific or technical knowledge they are hoping to achieve.

From 1 April 2024, the current Small or Medium-sized Enterprise (SME) Scheme, and the Large Company or RDEC Scheme will be combined at the current 20% rate, but the notional tax rate applied to loss-makers in the merged scheme will be the small profit rate of 19%, rather than 25%.

We are here to help

If you have any questions on the upcoming R&D tax relief changes or would like assistance with submitting a claim, please get in touch with a member of our specialist R&D team or your usual Azets advisor.