From 1 April 2024, the UK’s two R&D tax relief schemes—the SME scheme and the RDEC—were replaced by a single merged regime. The new rules apply in full to all accounting periods beginning on or after 1 April 2024. There is no apportionment or split-period treatment. If your accounting period starts before that date, you remain under the old rules for the whole period.
The reform aims to simplify the system, but in practice it changes who can claim, how much can be claimed, and what evidence HMRC will expect.
The Core Features
One unified credit
The merged scheme gives a single 20 per cent expenditure credit, shown “above the line” in company accounts. As it is taxable, the net benefit is around 15 per cent for profit-makers and about 16 per cent for loss-makers.
No penalty for subsidies or grants
Under the previous SME scheme, subsidised R&D often lost relief. This restriction has been removed, making the system more accessible for funded projects.
Tighter subcontracting and overseas rules
Only the company that decides to undertake the R&D and bears the risk can usually claim. Overseas subcontractor and externally provided worker costs now qualify only in rare, strictly defined circumstances.
The ERIS exception
Loss-making SMEs whose R&D costs are at least 30 per cent of total expenditure may claim under the Enhanced R&D Intensive Support (ERIS) instead of the merged scheme. A one-year grace rule protects businesses that fall below the threshold temporarily.
What Businesses Should Do Now
- Check your accounting start date. If it begins on or after 1 April 2024, you must claim under the merged rules.
- Review contracts and supply chains. Clarify which party owns the R&D risk and decision-making.
- Assess overseas activity. Most overseas R&D costs will no longer qualify.
- Model your benefit. The merged credit’s taxable nature can change the overall cash benefit.
- Update documentation. The new rules increase HMRC’s focus on evidence showing who initiated and controlled the R&D.
The merged regime is intended to simplify R&D relief, but it also shifts responsibility onto claimants to show clear control, decision-making, and compliance. A careful review before your first merged-scheme claim is essential.
For clear, compliant guidance through the new regime, contact us.
Christopher Toms MA MAAT
Compliance Director, RandDTax