The UK R&D tax relief landscape has undergone significant reform since 1 April 2024, with the introduction of a merged scheme that aims to simplify the process but, in practice, introduces new complexities for many businesses.

The previous R&D tax landscape:

  • SME Scheme (up to 31 March 2023): SMEs could claim a 130 per cent enhancement on qualifying R&D costs, resulting in a net tax benefit of approximately 24.7 per cent for profitable companies and up to 33.35 per cent for loss-makers.
  • SME Scheme (from 1 April 2023): The enhancement was reduced to 86 per cent, with net benefits of up to 21.5 per cent for profitable SMEs. Loss-making SMEs saw their payable credit rate fall to 10 per cent, with net benefits up to 18.6 per cent. However, a special R&D-intensive scheme was introduced for SMEs spending over 40 per cent of their total expenditure on R&D, maintaining the previous 14.5 per cent credit rate.
  • RDEC Scheme (for large companies): Provided a 13 per cent credit (post-tax benefit of 10.5 per cent) until 31 March 2023, increasing to 20 per cent (post-tax benefit of 15–16.2 per cent) from 1 April 2023.

The current R&D Merged Scheme (from 1 April 2024):

  • A single, unified scheme now applies to both SMEs and large companies, with a headline credit rate of 20 per cent. This delivers a post-tax benefit of up to 16.2 per cent for most claimants.
  • The enhanced R&D-intensive scheme continues for loss-making SMEs that spend over 30 per cent of their total expenditure on qualifying R&D, offering an 86 per cent enhancement and a 14.5 per cent credit rate.

Transitional arrangements

All five schemes remain operational for now, covering claims for expenditure incurred during their respective periods. It is crucial to identify which scheme applies to each claim period.

Key compliance changes

  • Pre-notification: Businesses making their first claim, or those who have not claimed in the last three years, must notify HMRC within six months of the end of the accounting period in which the R&D took place.
  • Additional Information Form (AIF): Every claim must now be accompanied by detailed explanations of the R&D activities and the innovation involved.

Practical implications

The merged scheme brings a degree of simplification but also new compliance obligations and transitional complexities.

Increased HMRC scrutiny means that careful planning, timely notification, and comprehensive documentation are essential to secure relief and avoid missed opportunities.

Despite these changes, substantial tax relief remains available for businesses genuinely investing in innovation.

How Milsted Langdon’s R&D team can help

  • Assess eligibility:
    Our R&D team can help determine whether your projects and activities meet the strict definitions of qualifying R&D, including interpreting the BEIS Guidelines and ensuring the project seeks a genuine advance in science or technology.
  • Maximise claims:
    We can help identify all qualifying expenditure, ensure correct categorisation, and help claim the maximum relief available under the merged scheme.
  • Navigate compliance:
    Our team will guide you through the complex claim process, including the preparation and submission of the Additional Information Form, pre-notification requirements, and correct completion of the CT600 and CT600L forms.

For guidance and advice on the changes to R&D tax relief, please get in touch with our team today.