Reform of R&D reliefs

Last updated: 02/04/2025

Finance Act 2024 introduced legislation for a new merged R&D regime to replace the previous RDEC and small and medium-sized enterprise (SME) schemes, as well as an additional tax relief for loss-making, R&D intensive SMEs (those with qualifying R&D expenditure of at least 30% of total expenditure).
The new merged regime provides a 20% above-the-line taxable credit, delivering a net benefit of 15% for profitable companies and 16.2% for loss making companies. Loss-making, R&D intensive SMEs will receive an additional deduction of 86% of qualifying R&D expenditure, delivering a net benefit of up to 27%.
Under both regimes, relief is limited to UK and qualifying overseas expenditure and contracted out R&D is generally claimed by the ‘payer’ rather than the ‘doer’.
In the Corporate Tax Roadmap, published alongside Autumn Budget 2024, the new government confirmed its commitment to R&D tax credits, including maintaining the generosity of the rates.
At Spring Statement 2025, the government published a consultation on widening the use of advance clearances in R&D relief.
Timing: the new merged regime applies for accounting periods beginning on or after 1 April 2024. The consultation on widening the use of advance clearances closes on 26 May 2025.