Merged R&D program – essential information
Merged R&D program – what you need to knowThe merged R&D tax credit program was confirmed in the Autumn Statement in 2023 and has been introduced for accounting cycles starting from or after April 1, 2024. The new program signifies a major shift to R&D tax incentives in a very brief period, so it’s crucial that your business comprehends how the merged scheme will affect your R&D tax applications going forward.As the UK’s top R&D tax consultancy, Hamilton & Company Wood & Company is in the ideal place to provide forward-thinking actionable guidance tailored to your company. We have participated in every R&D discussion and always shown our dedication to championing innovative businesses. Let us support you today.What is the merged R&D program?The merged R&D scheme sees two of the UK’s current R&D tax relief incentives merged into a single scheme:Enhanced tax credits and payable refunds for eligible SME costs.R&D expenditure credit (RDEC) for large businesses, SME subcontractors and subsidised R&D costs.The merged scheme is also known as the R&D single program, simplified scheme or new RDEC. The merged scheme has been implemented in a similar way to the existing RDEC scheme with a few notable distinctions.Who is impacted by the merged R&D program?If you’re applying for R&D tax relief, it is likely that you will be impacted by the implementation of the merged scheme.Despite the intention to streamline R&D tax credits by merging the previous SME and RDEC programs, there are still differences you should note depending on the kind of company you are and the contractual arrangements under which you are carrying out R&D.If you’re an SME, you must determine whether you fall under the R&D intensive incentive or the merged scheme. Keep in mind to be categorized as an SME for R&D tax purposes you must have fewer than 500 staff and either a turnover of no more than €100 million or gross holdings of no more than €86 million.You will also need to think about whether the decision to carry out R&D sits within your company or elsewhere in the value chain. Typically, companies will not be able to apply if R&D has been outsourced to them.To learn more about the relevant changes, follow the links below.Are you:An SME with less than 30% of total expenditure on eligible R&D (the threshold to qualify for an increased rate for R&D intensive SMEs).An SME vendor OR SME WITH subsidized R&D now applying under RDEC. Note the handling has changed under the merged scheme.A loss-making R&D INTENSIVE SME with over 30% of total expenditure on eligible R&D.A LARGE COMPANY with 500 or more employees and either over €100 million turnover or €86 million gross assets.Why was the merged R&D program implemented?The government’s intention with R&D tax incentives is to encourage private sector investment in new developments to enhance the UK economy’s growth and productivity. A series of adjustments to R&D tax credits have been implemented since 2021 with the aim of making the incentive easier and protecting it from abuse. The merged scheme signifies both the newest adjustment and the conclusion of this period of consultation.When did the merged R&D program start?The merged program for R&D tax credits is effective for accounting periods starting from or after 1 April 2024. It’s crucial to understand that this is not for costs incurred from the start of April as previously proposed.So a company that makes accounts to 31 December each year will enter the merged program for the first time when evaluating an R&D claim for its accounting period ending 31 December 2025, whereas one which closes accounts to March will join for its 31 March 2025 cycle.The transition for businesses is streamlined with no requirement to apply through different systems for an accounting period that straddles 1 April 2024. The commencement date means that the merged program’s start for some companies will be delayed beyond earlier plans.
