The Autumn Statement, a pivotal moment on the UK’s fiscal calendar, promises a glimpse into the government’s economic roadmap and policy priorities. With this year’s Autumn Budget fast approaching, the government’s plans for R&D tax policy are hotly anticipated, and here is all you need to know ahead of next week’s announcement.
A merged R&D tax relief scheme
During last year’s Autumn Statement, Jeremy Hunt stated that as part of the ongoing review of R&D tax reliefs, the government is reforming the reliefs to optimise the spending of taxpayers’ money.
It is thought that merging the SME and RDEC schemes would reduce complexity and encourage more companies to claim. Over the past year, the government consulted industry on the design of a potential merged scheme, you can find our consultation response here. Shortly after the conclusion of the consultation, the UK government published draft legislation outlining the potential structure for a merged scheme. The government has made clear that they have not yet committed to transitioning to a merged scheme, however, in our opinion, the drafting of potential legislation is a signal of intent, and it is something that the government is seriously considering.
The expected timeline for a merged R&D tax relief scheme
The upcoming Statement is likely to give further clarity on the government’s position for implementing a merged scheme and a suggested timeline for next steps. The government holds the option to implement a merged scheme from April 2024 onwards. We believe that an April 2024 date is too soon given that key parts of the legislation are contested amongst industry, such as the form in which subcontractor costs are included and clarification around subsidies. Another complicating factor is the creation of the R&D intensive SME scheme which, in its current form would leave this outside of the merged scheme. In effect, there would still be two R&D tax relief schemes. A further year’s consultation may be necessary to make sure that the transition to a merged scheme delivers on its intended purpose. However, given that there is a general election on the horizon in 2024, the political landscape is very unpredictable, I mean, even David Cameron is back in government, who saw that coming?
Compliance – fraud and error
In July this year, HMRC found a high level of error and fraud within the SME R&D tax relief scheme for claims filed in 2020/2021. The upcoming Statement may have a focus on HMRC’s stance on tackling error and fraud within the R&D schemes and progress since the last fiscal event. We are expecting HMRC to publish an update on the July figures as part of its response to the Public Accounts Committee, HMRC is due to give oral evidence in December 2023.
The need for clarity from November’s Autumn Statement
With all the recent changes what we need is certainty. At a time when the R&D tax system may be on the cusp of a new beginning. It’s important that this Statement provides advisors and their clients certainty over the merged scheme, if it is to be implemented, and if so, when.