The R&D Merged Scheme: A Comprehensive Guide
The research and development (R&D) landscape has undergone significant changes in recent years with the R&D Merged Scheme. This new framework combines previously separate R&D tax relief schemes into a unified structure. It is designed to simplify claims, increase transparency, and boost innovation across all sectors
In this updated guide, we examine the key aspects of the Merged R&D Scheme. This includes key benefits and features to eligibility criteria, and also how your business can access R&D tax credits under the new system.
Published by Alexander & Co | Expert R&D Tax Advisors
What is the Merged R&D Scheme?
The Merged Research and Development Scheme is a government initiative to combine different forms of R&D funding and support under a unified framework. This merger aims to simplify the process for businesses looking to access government-backed tax incentives to boost their innovation efforts.
This new scheme applies to accounting periods beginning on or after 1 April 2024. The Merged Research and Development Scheme consolidates the former SME R&D tax relief and RDEC (Research and Development Expenditure Credit) into one system.
This unified approach aims to:
- Simplify access to R&D funding
- Provide consistent support across all business sizes
- Boost innovation across industries via enhanced R&D credits
Additionally, the scheme includes Enhanced R&D Intensive Support (‘ERIS’), providing increased support for R&D-intensive SMEs — specifically, those with qualifying R&D expenditure that accounts for 30% or more of total business costs.
Key Features of the Merged R&D Scheme
- Single R&D Tax Credit System
All businesses, regardless of size, now apply through a single, unified R&D credits framework, simplifying the claims process and reducing administrative complexity. - 20% Taxable Credit on Qualifying Expenditure
Companies can claim a taxable credit of 20% for qualifying R&D expenditure. This mirrors the RDEC system but is now applicable more broadly. - Enhanced Support for R&D-Intensive SMEs
Loss-making SMEs with significant R&D spend (at least 30% of total costs) may qualify for Enhanced R&D Intensive Support, offering a 14.5% payable credit on surrenderable losses. - Clearer Rules for Subcontracted R&D
The merged scheme clarifies which party can claim when R&D is subcontracted, ensuring transparency and reducing duplication in claims. - Focus on UK-Based R&D Activities
Most qualifying activities must be carried out in the UK, but some overseas costs may still be eligible under specific criteria.
R&D Benefits for Businesses
Reduced Costs of Innovation: One of the most significant benefits of the merged scheme is that it helps offset the costs associated with R&D activities. By providing easier access to R&D tax credits and grants, businesses can reduce their financial burden and invest more in research and development. This is especially valuable for startups and SMEs with limited budgets.
Encouragement of Research Investment: The scheme encourages businesses to increase their investment in R&D, which is crucial for maintaining a competitive edge in an increasingly globalized market. With access to funding and tax relief, UK businesses are incentivized to prioritise R&D in their strategic plans.
Boosting the UK’s Global Competitiveness: The merging of R&D funding schemes positions the UK as a leader in fostering innovation. By simplifying the process and enhancing support, the government hopes to attract more businesses to invest in R&D within the UK. This, in turn, contributes to the broader economy by creating high-skilled jobs, fostering technological advancements, and encouraging international collaborations.
Who Can Benefit from the Merged R&D Scheme?
The new merged R&D scheme supports a wide range of industries, including:
- Technology and software
- Clean energy and sustainability
- Pharmaceuticals and biotech
- Engineering and manufacturing
- Artificial intelligence and robotics
Startups, SMEs, and large enterprises all stand to gain from the improved R&D tax credits process, particularly those investing heavily in innovation and product development
How to Apply for tax credits under the Merged R&D Scheme
- Identify qualifying R&D activities
- Calculate eligible expenditure
- File a claim with HMRC on their online portal
- Maintaining accurate documentation for audit purposes
Partnering with an expert R&D tax advisor like Alexander & Co ensures your claim is accurate, maximised, and submitted on time. This will help to reduce the risk of delays or rejection of claims. For companies looking for advice on navigating the process, Alexander & Co can assist businesses with their claims.
Conclusion
The Merged Research and Development Scheme simplifies and enhances the way businesses access financial support for innovation. By streamlining R&D funding, offering increased tax relief, and fostering greater collaboration between sectors, the scheme is aimed at driving innovation in the UK.
As the UK continues to focus on sustainable development, technological breakthroughs, and sector-specific advancements, the Merged Scheme provides a valuable opportunity for businesses to secure the support they need to remain at the forefront of global innovation.
A range of businesses, from artificial intelligence to clean energy, can benefit from this initiative, reducing costs and accelerating research. This will also help to ensure that the UK remains a hub for cutting-edge innovation in the years to come.
Get expert advice from our Merged R&D Scheme specialists
Our specialist, in-house R&D tax relief specialists can support you with your claim. This will greatly assist, as claiming yourself can be a complicated and prolonged endeavour. We can assist you with claims. These can often result in a large sum of corporation tax BEING repaid or cash tax credits.
Speak to Our R&D Tax Credit Specialists Today
It is important to find out if you are eligible to make a claim immediately. This is because you do not want to miss any deadlines and potentially lose out on significant credits. Don’t miss your opportunity to claim, for more information, contact our friendly and professional team today.
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Email: info@alexander.co.uk
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This article was written by Rowan Morrow-McDade, ACA, CTA, Tax Director at Alexander & Co. Rowan is a Chartered Accountant, Chartered Tax Advisor and a member of the ICAEW
