As the R&D tax scheme begins to enjoy a period of stability after significant upheaval, there are plenty of rumours flying around!
We want innovators from every sector to benefit from the scheme, so our experts are here to dispel some of the most common misconceptions around R&D tax.
Myth or fact? RDEC and the SME relief scheme are no more
Myth – for accounting periods beginning before 1 April 2024.
This is when the merged scheme will begin to apply, so any claims you are preparing now will still be made under the R&D Expenditure Credit (RDEC) or SME relief scheme.
Clients may be expecting to claim under the merged scheme, particularly due to the significant fanfare around the announcement, so be prepared to dispel these misconceptions.
Myth or fact? SMEs can access additional reliefs
Fact – but this is changing.
Under the old SME relief scheme, which will still apply for accounting periods starting before 1 April 2024, all SMEs with eligible projects could claim an additional deduction of 86 per cent, giving a total of 186 per cent.
Additionally, loss makers could claim a 10 per cent payable credit, or 14.5 per cent if the business met a 40 per cent R&D intensity threshold (reduced to 30 per cent in 2023).
However, under the merged scheme, only R&D intensive, loss-making businesses will be eligible for the Enhanced R&D Intensive Support (ERIS) scheme.
SMEs which do not allocate at least 30 per cent of their expenditure to R&D will claim under the merged credit scheme.
Myth or fact? You must include details for every project
Myth – depending on how many projects are included in your client’s claim!
When making a claim, your client will be asked to provide project details to demonstrate that the claim is compliant, including:
- Relevant qualifying costs
- Indirect qualifying costs
- How the project meets the definition of R&D
- Contact details for an R&D lead at the company
If your client is claiming for between one and three projects, they must include relevant information for all of them.
However, for claims including additional projects, they will need to provide:
- For four to nine projects: Details for three or more projects that account for at least half of the qualifying expenditure.
- For 10 or more projects: Details for the 10 projects accounting for the highest share of qualifying expenditure.
Make sure your client has all the data they need to hand, as this can make claims run more smoothly and minimise the chance of an investigation.
For more R&D mythbusting, get in touch with our team and discuss your needs.
