- 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. The government will consult 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, so applies from 1 January 2025 for companies with a December year end. Consultation on widening the use of advance clearances will take place in spring 2025.
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