SPECIALIST R&D MERGED SCHEME SUPPORT FOR UK COMPANIES
The R&D Merged Scheme provides a streamlined route to R&D tax relief for innovative UK businesses. We identify qualifying activity, analyse eligible expenditure, prepare the technical and financial evidence and help you build a robust claim while safely maximising the benefit available to your business.
rom 1 April 2024, the R&D Merged Scheme and Enhanced R&D Intensive Support (ERIS) replaced the former SME and RDEC schemes for accounting periods beginning on or after that date. ERIS is available to qualifying loss-making R&D-intensive SMEs that meet the 30% intensity condition; other qualifying companies generally use the R&D Merged Scheme.
The Merged R&D Scheme brings together most eligible companies into a single, main route for R&D tax relief. It rewards investment in projects that seek an advance in science or technology and involve uncertainty that could not readily be resolved by a competent professional.
Qualifying expenditure generates a taxable R&D expenditure credit which can reduce tax liabilities or, after the statutory payment steps, result in a cash payment from HMRC.
For companies of different sizes.
The Merged Scheme provides a 20% taxable expenditure credit, with an effective benefit typically between 15% and 16.2% of qualifying R&D expenditure.
Across sectors from software to engineering, construction, engineering and more.
Even if the project you set out to deliver did not go to plan, then you still may be eligible to claim.
Innovation isn't limited to any one sector. If your business is solving problems through trial and error, development or technical improvement, the scheme may apply to your business subject to eligibility, company status and eligible expenditures incurred.
Your work seeks to achieve an advance beyond current capability or industry knowledge. Replicating another company's trade secret counts.
There were uncertainties that weren't readily solvable using existing knowledge, processes, techniques or existing workarounds.
You carried out systematic R&D (trial and error) to try and overcome those project uncertainties. Work was done to try and resolve issues identified.
R&D starts when a problem is identified and works is undertaken to overcome the problem in the work or project. It ends when the project succeeds or is abandoned.
Focus on identifying a problem standing in the way of achieving an innovation in your industry. It's about the journey, the work you are doing and what activities you are conducting whilst working on the project.
Realistic benefit on £100,000 of qualifying R&D expenditure
25% Corporation Tax (Main Rate)
Illustrative qualifying expenditure
£100,000
Merged Scheme expenditure credit
20%
£100,000 x 20%
Gross credit (added to profit)
£20,000
Corporation Tax on credit 25% of £20,000
£5,000
Net benefit realised
£15,000
15% of effective benefit
19% National tax restriction
Qualifying expenditure
£100,000
Merged Scheme expenditure credit
20%
£100,000 x 20%
Gross taxable expenditure credit
£20,000
Treated as a taxable trading income
National tax withheld
19% of £20,000
£3,800
Immediate cash benefit
£16,200
16.2% of effective benefit
*The withheld £3,800 is not lost. It is carried forward and may be used against future Corporation Tax liabilities. Economic value of the credit can be worth up to £20,000 over time.
Figures assume the full £100,000 qualifies and are not reduced by the PAYE cap, outstanding tax liabilities or other payment steps. A loss making, R&D intensive SME should also compare the results with the ERIS scheme, which may provide a higher payable benefit.
The credit is set against your company’s taxable profits. Loss-making companies or those with insufficient profits can surrender the credit for a cash payment from HMRC.
Relevant salaries, wages, pension contributions and NICs for time spent on qualifying Research and Development Activities.
Qualifying proportion of payments for agency or temporary staff involved in R&D.
Payments for R&D from external parties may qualify (subject to conditions)
Subscriptions, licences and cloud computing costs used directly in R&D.
Materials, power and other utilities used up or transformed during relevant and qualifying R&D activities.
Participant costs for qualifying clinical trials may be claimable subject to status.
Where your company decided that R&D was needed and planned work to overcome technical uncertainties, you may be able to claim eligible external costs.
Where you encounter unforeseen R&D while delivering a contract for a customer, you may be able to claim if you independently decided and planned that R&D and the customer did not initiate or anticipate the R&D requirement.
Contracted scenarios can be complex. We'll review your arrangement and advise on the best approach.
R&D for tax relief includes projects that seek to achieve an advance in science or technology through systematic research. This may involve creating new processes, products, or enhancing existing ones. Activities that contribute to resolving scientific or technological uncertainties might also qualify. Consult with us to see if your projects fit this criterion.
To claim R&D tax relief, you need to submit a claim as part of your corporation tax return. This includes providing details of your R&D projects and associated costs. We can assist you throughout the process to ensure a smooth and successful claim.
Eligible costs for R&D tax relief include staff wages, materials, and overhead expenses directly related to R&D activities. Other costs may also qualify depending on their direct connection to your projects. It’s essential to assess your finances carefully, and we can guide you through this process.
The R&D tax relief claim process can take several weeks to a few months, depending on the complexity of your case and the responsiveness of HMRC. We aim to streamline this process and keep you informed every step of the way.
If your claim is rejected, we will engage with HMRC’s decision and seek to address any particular questions needing clarification. We can assist you in reviewing the reasons for rejection and help you to build a strong case to resubmit your claim, ensuring your eligibility is fully addressed.
Our specialist team can provide guidance and support throughout your R&D tax relief claim process. With extensive experience and expertise, we ensure that your eligibility is accurately assessed and maximised for your benefit.
If you have further questions about R&D tax relief, don’t hesitate to reach out. Our team is here to help.
Start your free assessment today and discover the potential benefit your business could be entitled to.
or call 0161 841 1806 to speak to a specialist advisor
