Articles16 May 2024
R&D tax credits – advanced assurance, will it now be recommended practice?
This advanced assurance hasn’t been widely used historically, we explain why it may become standard practice
Articles
The merger of the two existing research and development (R&D) tax relief schemes means some companies will lose out as a result.
The two existing research and development (R&D) tax relief schemes are set to merge, although the newly created scheme will be similar to the R&D expenditure credit currently claimed mainly by large companies.
Although the merger will remove the complexities when companies move between schemes, there will invariably be some who significantly lose out as a result of the changes.
The merged scheme and other changes will apply in relation to accounting periods beginning on or after 1 April 2024.
Along with a deduction for the R&D expenditure itself, the RDEC provides for a 20% standalone credit. Since the credit is taxable, it is worth £15,000 for every £100,000 spent on R&D assuming the main rate of corporation tax applies.
If not used to reduce the current year’s corporation tax liability, the expenditure credit – before any alternative use – is capped according to the amount of PAYE and national insurance contributions paid in respect of R&D workers. In future, the more generous cap from the SME scheme will be used.
Despite the merger, loss-making R&D-intensive small or medium-sized enterprises (SMEs) will still be able to claim a 14.5% repayable credit under the existing SME scheme.
Also, a one-year grace period will be introduced for companies that fall below the 30% threshold.
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