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Research and Development Tax Credits 2024 Reform

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What are Research and Development Tax Credits?

Research and Development (R&D) tax credits are a UK government incentive designed to encourage companies to invest in innovative projects in science and technology.

They offer a valuable financial return for businesses engaged in advancing their field, resolving scientific or technological uncertainties, or developing new processes, products, or software. Eligible companies can reduce their tax bill or claim payable cash credits as part of their corporation tax. This scheme is pivotal in promoting research and development within the UK, supporting businesses in pioneering new advancements and enhancing their competitiveness in the global market.

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What reforms to Research and Development Tax Credits were announced?

As part of reforms announced in the Autumn Statement on 22nd November, the government is reforming Research and Development tax credits. From April 2024, HM Revenue & Customs (HMRC) is set to introduce a new, unified Research and Development (R&D) tax credit scheme, merging the existing Research and Development Expenditure Credit (RDEC) and Small and Medium-sized Enterprises (SME) schemes. Alongside this, a distinct scheme for R&D-intensive SMEs will be established. These schemes will be applicable for accounting periods beginning on or after 1st April 2024. 

When will the changes take place?

For businesses with accounting periods running from 1st January 2024 to 31st December 2024, the new schemes will not apply until the start of their next financial year. However, for those whose accounting periods span from 1st April 2024 to 31st March 2025, the new schemes will be effective immediately. 

Why are these Research and Development reforms taking place?

The UK’s Research and Development (R&D) tax relief schemes are being updated following an extensive review by HM Revenue & Customs (HMRC). This review aims to tackle the misuse of the R&D tax relief and ensure that the taxpayers’ money is spent more effectively. The primary objective is to streamline the process and focus the financial support on companies genuinely engaged in qualifying R&D activities.

HMRC is also committed to maintaining strict compliance with these schemes and plans to publish an action plan detailing steps to enhance compliance, although the release date of this plan has not been announced yet.

Jack Ross Chartered Accountants Can Help

Jack Ross Chartered Accountants has a wealth of experience in handling Research and Development tax credit claims and can advise on how to best maximise this incentive to help grow your business, innovate within your chosen field and reduce your corporation tax bill.

If you are in need of our expert services, please use the contact form below and a member of our dedicated team will be in touch to discuss next steps and book a free 15 minute consultation.

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