Merged R&D scheme- what you need to know

The government confirmed in the Autumn Statement 2023 that a merged R&D tax relief scheme will
be introduced for accounting periods beginning on or after 1 April 2024. This represents a significant
change to R&D tax incentives in a very short timeframe, so it’s imperative that your business prepares
without delay.

As the UK’s leading R&D tax consultancy, ForrestBrown is in the best position to provide proactive,
actionable advice tailored to your business. We’ve engaged with every R&D consultation and always
demonstrated our commitment to championing innovative businesses. Let us support you today.

Find out what the merged scheme means for your business
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What is the merged R&D scheme?
The merged R&D scheme sees two of the UK’s current R&D tax relief incentives brought together
into a single scheme:

Enhanced tax relief and payable credits for qualifying SME expenditure.
R&D expenditure credit (RDEC) for large businesses, SME subcontractors and subsidised R&D
expenditure.
The merged scheme is sometimes referred to as the R&D single scheme or simplified scheme. It will
be implemented in a similar way to the existing RDEC scheme with a few notable distinctions.

Who is impacted by the merged R&D scheme?

If you’re claiming R&D tax relief, it is likely that you will be impacted by the introduction of the
merged scheme.

Despite the intention to simplify R&D tax relief by merging the previous SME and RDEC schemes,
there are still differences you need to be aware of depending on the type of business you are and the
contractual arrangements under which you are carrying out R&D.

If you’re an SME, you need to identify whether you fall under the R&D intensive incentive or the
merged scheme. Remember, to be classed 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 assets of no more than €86
million.
You will also need to consider whether the decision to carry out R&D sits within your business or
elsewhere in the supply chain. Generally, companies will not be able to make a claim if R&D has
been contracted to them.

To find out more about the changes specific to you, follow the links below.

Are you:

An SME with less than 30% of total expenditure on qualifying R&D (the threshold to qualify for an
enhanced rate for R&D intensive SMEs).
An SME SUBCONTRACTOR OR SME WITH SUBSIDISED R&D currently claiming under RDEC.
Remember, the treatment has changed under the merged scheme.
An R&D INTENSIVE SME with more than 30% of total expenditure on qualifying R&D.
A LARGE COMPANY with 500 or more staff and either more than €100 million turnover or €86
million gross assets.
Why is a merged R&D scheme being introduced?
The government’s intention with R&D tax incentives is to support private sector investment in
innovation, benefitting the UK economy by boosting productivity and growth. A number of changes
to R&D tax reliefs have been made since 2021, with the aim of simplifying the incentive and
protecting it from abuse. The merged scheme represents both the latest change and the conclusion of
this period of consultation.

What are the merged R&D scheme rates?

The table below shows how R&D tax relief rates have changed in recent years. The merged scheme
applies for accounting periods beginning on or after 1 April 2024.

Current incentives Current incentives Merged scheme

Your business SME R&D tax incentive RDEC Merged scheme SME intensive scheme
Company type
Before 1 April 2023
After 1 April 2023
Before 1 April 2023
From 1 April 2023
From 1 April 2024
From 1 April 2024
Loss-making SME Up to 33.35% Up to 18.6% 10.5% 15% 16.2%
Profit-making SME Up to 24.7% Up to 21.5% 10.5% Up to 16.2% Up to 16.2%
R&D intensive SME Up to 27% Up to 27%
Large company 10.5% Up to 16.2% Up to 16.2%
When will the merged R&D scheme come into force?
The merged scheme for R&D tax relief will apply for accounting periods beginning on or after 1 April
2024. It’s important to note that this is not for expenditure incurred from the start of April as
previously proposed.

So a business that prepares accounts to 31 December each year will enter the merged scheme for the
first time when considering an R&D claim for its accounting period ending 31 December 2025,
whereas one which makes up accounts to March will enter for its 31 March 2025 period.

The changeover for businesses is simplified, with no need to claim under different regimes for an
accounting period that straddles 1 April 2024. The commencement date means that implementation of
the merged scheme for some businesses will be later than previously planned.