UK Research and Development Tax Relief Scheme – RDEC Update

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UK science and technology companies face substantial changes to the way in which they can claim innovation support through the Government’s R&D Expenditure Credit (RDEC) scheme.

New Merged RDEC Scheme

Since its inception, the UK Government’s RDEC and SME schemes have bolstered innovation and development in the fields of science or technology. 

In April 2024 a new merged scheme R&D expenditure credit (RDEC), and enhanced R&D intensive support (ERIS), replaced the previous RDEC and SME schemes. RDEC and ERIS applies to accounting periods beginning on or after 1 April 2024. 

With changes to qualifying conditions and criteria the UK Government published updated guidance on how to claim for tax relief. The most significant changes affect the level of tax relief available and the ban on overseas contracting / subcontracting, except in specific circumstances.

Companies who meet the tax definition of R&D are encouraged to plan ahead to see how this may affect future claims. 

Spotlight on Contractors & Subcontractors

Contracting or subcontracting of scientific R&D to trusted partners is standard practice in drug discovery and development. It offers many benefits not least the likely rapid advancement of projects and wider programs of work. 

Previously tax relief could be claimed on qualifying expenditure irrespective of where the work took place in the world. To qualify for relief under the new rules, expenditure on payments to contractors or subcontractors is eligible only when the R&D work is undertaken in the UK by UK-based staff. 2 

There are limited specific circumstances when relief can still be claimed for work outside the UK and full details of qualifying criteria can be found here.

In addition to Government policy and guidance documents, there are multiple resources available to help guide companies through the new RDEC scheme. Audit, tax and consulting firm RSM UK has developed one such resource, an interactive tool to help explain the changes and their impact.

Click here to see how the RDEC changes could affect your business. 

UK Scientific Research Partner

Charnwood Discovery is a fully UK-based drug discovery research partner offering chemistry, bioscience and ADME/DMPK services and solutions. From standalone customized solutions through to fully integrated projects  we can support you in your R&D innovation. 

References

  1. Gov.uk. 29 April 2024. Research and Development (R&D) Tax Relief: The merged scheme and enhanced R&D intensive support. Available from: Research and Development (R&D) Tax Relief: The merged scheme and enhanced R&D intensive support – GOV.UK (www.gov.uk) [Accessed June 2024]
  2. Gov.uk. 27 March 2024. Research and development tax reliefs: new contracting out rules and overseas restrictions – draft guidance. Available from: Research and development tax reliefs: new contracting out rules and overseas restrictions – draft guidance – GOV.UK (www.gov.uk) [Accessed June 2024]
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