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ATT warns of dangers in rushing through R&D relief changes

19 July, 2023

Uncertainty over the introduction of a new R&D tax relief regime risks leaving businesses “in limbo”, the Association of Taxation Technicians (ATT) has warned.

Draft legislation for the Finance Bill 2023-24, published yesterday,1 confirmed that the Government has deferred the decision on whether to merge the two current research and development (R&D) tax relief schemes, one for small and medium sized entities (SME) and a separate R&D Expenditure Credit (RDEC) scheme used mainly by larger companies, until the next fiscal event, likely to be the Autumn Statement in October or November.  

This means it could leave itself less than six months to put systems in place for the new, single scheme, which was previously proposed to take effect from 1 April 2024.

Jon Stride, Vice Chair of ATT’s Technical Steering Group, said:  

“Successfully delivering a new scheme on this timetable would be extremely challenging for businesses, agents, software providers and HMRC, who would need to put the required systems and processes in place in a short space of time.  

“While we welcome the deferral of the decision to allow for additional consultation, we question whether there is sufficient time before next April to allow for proper consideration and for any updates to be made to the draft legislation issued today.

“The Government needs to ensure that sufficient time is given not only to allow proper consultation but also to let businesses plan for any future changes in the relief schemes. Deferring the final decision on the merged scheme until much closer to a possible April 2024 implementation will only create more uncertainty and leave businesses in limbo.” 

The ATT2 says that, should the new regime be approved, its introduction should be delayed, with the extra time used to ensure it is designed in such a way that it works for companies of all sizes, especially small and medium sized entities.

Jon Stride added:

“Given the fundamental nature of the changes proposed, and the impact they may have on R&D activity in the UK, the process should not be rushed, but instead the appropriate time taken to ensure that any new scheme is well designed and operates effectively for all sizes of business.

“A number of changes to R&D relief have been introduced recently, including increased administrative requirements to tackle non-compliance and fraud, and a reduction in the relief available to SMEs.

“Introducing the new combined scheme from April 2024 would also mean we will not have sufficient time to assess whether recent changes have actually had any impact on fraud and abuse.” 

Notes for editors 

  1. Research and Development reform — additional tax relief and potential merger.

  2. R&D Tax Reliefs Review: Consultation on a single scheme and the ATT’s response to that consultation.