R&D reform consultation: have your say on big changes to tax relief

In the 2022 Autumn Statement, Chancellor of the Exchequer, Jeremy Hunt announced a reform of the UK’s R&D tax relief schemes. Until 13 March 2023, you can contribute your opinions and ideas to the consultation.

In this post, we explain what’s happening and how to take part.

Contents

• Why are the government proposing to change R&D tax relief?
• What is the R&D tax relief consultation?
• Why should I take part in the consultation?
• How do I take part in the consultation?
• What’s the deadline for submissions for the R&D consultation?
• What are the consultation questions?
• What happens when the consultation ends?
• Talk to an expert

Why is the government proposing to change R&D tax relief?

In the Autumn Statement in 2022, the Chancellor announced that the government would reform R&D tax relief with these aims (Statement PDF, p55):

• to improve the competitiveness of the RDEC scheme
• to make sure taxpayers’ money is spent effectively to support innovation
• to move towards one, simplified scheme based on RDEC

The government has already made some changes to the SME and RDEC schemes – these changes come into effect from April 2023. But the reform announced in the Autumn Statement will make changes that go further to change how the tax relief works.

What is the R&D tax relief consultation?

The reform to the UK R&D tax relief schemes announced last autumn is currently at consultation stage. The consultation is a two-month open invitation for anyone to submit their views on the current R&D tax relief schemes and proposed changes.

Through this consultation process, the government will gather feedback about merging the two R&D schemes (SME and RDEC) into one scheme, aligning the UK scheme with those of other OECD countries.

The consultation is open to all – individuals, businesses, accountants, organisations representing groups of businesses or sectors – if you’ve used the schemes, you help people use the schemes, or you’re considering claiming, then the government is interested to hear from you. It’s easy to take part – you’ll submit your response by email.

Why should I take part in the consultation?

If your company benefited from R&D tax relief or if you’re yet to make a claim, your opinions are important. The government states that they want to hear views from businesses, representative bodies and accountants with experience of using the existing R&D schemes.

The reformed scheme needs to be appropriate for the people who use it – no company is too small to take part in the consultation.

How do I take part in the consultation?

You don’t need to apply or to wait to be asked. To take part in the consultation about reforms to R&D tax relief, you’ll need to prepare your responses to the consultation questions – see below. It doesn’t matter if you don’t answer all the questions – answer as many as you can.

When you’re finished answering the questions, email your answers to:

[email protected]

In your email, write who your response is from – you need to say whether your submission is from you as an individual or on behalf of your business or organisation.

What’s the deadline for submissions for the R&D consultation?

The consultation is open from 13 January to 13 March so to take part, you’ll need to send your response by 13 March 2023.

What are the consultation questions?

Below we’ve listed the questions to answer to create your response to the R&D tax relief consultation. For full background to the questions, take a look at the consultation PDF which explains the details of the schemes and suggested changes the government is evaluating.

It doesn’t matter if you don’t answer all the questions. You can send your response as a document attached to an email or just paste your answers into the email. You can even choose just to submit a comment, without answering the questions.

When you’re ready, send your response to the email address above.

1. Do you agree a new scheme should be an above the line RDEC like credit? If not, what alternative would you propose?
2. Does the taxability and subsequent different post tax net benefits impact your decision making when allocating R&D budgets?
3. If you use RDEC now, is there anything in your view that should be changed?
4. Do you agree the same treatment of subcontracting should apply to all claimants in the merged scheme?
5. If so, where R&D activity is subcontracted, do you think that the customer should claim the tax relief, as in the SME scheme, or the subcontractor, the person carrying out the R&D, as in the RDEC?
6. Can you see any positive or negative impacts on your business or sector from the Government adopting either approach?
7. Do you have an alternative model you think could apply to all claimants in the new scheme? Please provide qualitative and quantitative evidence with your proposal.
8. What are your experiences of the PAYE/NIC cap?
9. Are there any ways the Government could simplify the PAYE/NIC cap whilst ensuring there is protection against abuse?
10. Which of the SME and RDEC PAYE/NIC cap should the Government implement in the new scheme?
11. Should the Government change the way either cap is calculated if it is taken forwards? And if so, how?
12. Do you consider the government should provide more generous support for different types of R&D or more R&D intensive companies relative to less R&D intensive companies?
13. In the event this were to be done, how might this best be achieved within an overall cost envelope?
14. If the schemes are merged, do you agree the Government should implement the merged scheme on accounting periods starting on or after 1 April 2024?
15. How can the Government ensure SMEs are supported in the transfer into a new scheme?
16. Does claiming for expenditure on qualifying indirect activities influence your decision to undertake R&D?
17. Do you think a threshold should be implemented? If one was implemented at what level should it be introduced?
18. What is the average amount of R&D expenditure per year per firm in your business or sector?

What happens when the consultation ends?

Under the guidelines for consultations, the government promises to publish their response within 12 weeks of the end of the consultation period, or explain why this isn’t possible. This means we can expect the response on or before 5 June 2023.

The government’s statement will set out how many responses were received, what consultees said, and how this informed the new policy. The statement will be published on the same page on the gov.uk website as the original consultation.

Talk to an expert

If you’re not sure if you can claim R&D tax relief – or if you haven’t yet filed your claim, book a free chat with our experts to find out how to maximise the amount you get back from HMRC.