Following a consultation earlier in the year, the UK government has published draft legislation on the proposed design of a merged R&D tax relief scheme. The draft proposes that the existing schemes – the R&D expenditure credit (RDEC) and the SME R&D relief – be merged into a single scheme that would operate as an above-the-line expenditure credit (in line with the current RDEC).
Given the value of R&D tax relief to the life sciences sector, it is helpful that the government has said that it recognises the important role that R&D plays in driving innovation and economic growth, as well as the benefits it can bring for society, and that it remains committed to supporting R&D. However, the impact that this change could have for those in the sector remains to be seen, as the government has not yet taken a decision on whether or not to proceed with the proposal.
The draft legislation is open for consultation until 12 September 2023 and, for now, the government intends to keep open the option of introducing a merged scheme from April 2024. A final decision on this will be made at a future fiscal event.
For further comments on this proposal, please see our full alert here.