Autumn Budget 2024 – what’s in it for R&D tax relief?
Overview
The good news, finally, is that after several years of legislative change, multiple consultations, increased compliance activity and turbulence in this space it seems that the R&D tax reliefs available in the form of the new merged R&D Expenditure Credit (RDEC) scheme and the Enhanced R&D Intensive Support (ERIS) are set to stay.
R&D within the Corporate Tax Roadmap
The Corporate Tax Roadmap which was published alongside the Budget made various key commitments which are to be celebrated – the roadmap sets out the current government’s commitment to ensuring predictability, stability and certainty within the UK corporation tax system, with a view to making the system as effective as possible and providing detail on improving the operation, accessibility and targeting of key schemes, reducing fraud and error and improving HMRC customer experience.
R&D tax relief is listed among the ‘major commitments’ in the roadmap – the government has committed to:
- Maintaining the generosity of the rates for the merged R&D Expenditure Credit scheme and the Enhanced Support for R&D Intensive SMEs , providing stability after significant change in recent years
- Enhancing the administration of R&D reliefs by establishing the R&D expert advisory panel, continuing to improve signposting and guidance on R&D reliefs, and launching an R&D disclosure facility by the end of 2024 and using its powers to tackle agents who breach the agent standards
- Confirming a consultation on widening the use of advance clearances in the R&D reliefs, aiming to further reduce fraud and error, improve the customer experience and provide certainty to businesses – the intention is to consult on lead options in Spring 2025
The roadmap also notes that the government will continue to consider longer term simplifications and incremental improvements to the effectiveness of the reliefs.
https://www.gov.uk/government/publications/corporate-tax-roadmap-2024
Approach to R&D tax reliefs 2023 – 2024
Also published on Budget day was an update to the original report published in July 2023 which set out HMRCs analysis of the scale and shape of non compliance in R&D tax relief claims for 2020 – 2021. The document sets out the scale and characteristics of error and fraud up to 2023-24. It outlines the policy and operational changes that have been made to address the high levels of error and fraud, and it includes further data on customer experience. If you are interested in the current fraud and error estimates and statistics, the HMRC Random Enquiry Programme, other monitoring activities and HMRC’s compliance approach (including recent initiatives to promote compliance and support businesses in ‘getting it right’), then this is worth a read and gives some valuable insights into HMRC’s views. There is also information on the activities of the R&D Anti-Abuse Unit, the R&D Professional Bodies Mailbox (a dedicated route for tax professionals to contact HMRC about R&D tax reliefs or any breaches in standards relating to R&D tax reliefs) and the R&D Agent Educational Model (where agents are assigned relationship managers to help improve their processes and educate agents on common inaccuracies in the claims they are submitting), all of which demonstrate HMRC’s continued focus in this space.
Enhanced Support for R&D Intensive SMEs (ERIS)
A minor legislative change was introduced to the legislation for ERIS to include all relevant R&D expenditure incurred on or after 1 April 2023 in the calculation of the R&D intensity condition – this measure will be treated as always having been in force, ensuring that all companies that were originally intended to benefit from the enhanced relief will be able to do so. In addition, in relation to ERIS for loss making SMEs in Northern Ireland, new rules around the cumulation of aid are being introduced due to the particular market conditions in Northern Ireland. Companies with a registered office in Northern Ireland and making an ERIS claim need to ensure they are up to date with the legislation.
