In its response to the recent research and development (“R&D”) consultation, the Institute sets out that more time is needed to consider the potential merger of the SME and large company R&D tax relief schemes into one single unified R&D expenditure credit scheme.
The following key recommendations were made:-
- the commencement date for any future changes to the current schemes should be deferred until 1 April 2027 at the earliest to allow for a longer period of consultation examining the case for and impact of unifying the two schemes, and the full range of potential merger options, including international comparisons;
- a different and higher rate of relief should continue to be available to SMEs, compared to the rate of relief for large companies, and these rates should be announced as early as possible and fixed for as long a period as possible;
- the current rules for sub-contracted costs of SMEs and large companies should be maintained within any unified scheme and there should be no minimum expenditure cap;
- additional targeted support should be considered by expanding the categories of qualifying costs, and by providing enhanced relief to companies engaged in projects with a direct and active link to climate change and/or sustainability;
- the Government’s UK Innovation Strategy should be refreshed and updated; and
- the UK Government should undertake a holistic end to end review of innovation tax incentives which should also include a review of the Patent Box regime.