Merged R&D Tax Scheme Announced in Autumn Statement

Chancellor, Jeremy Hunt confirmed in his 2023 Autumn Statement that the current Research & Development Expenditure Credit (RDEC) and SME R&D Tax Relief schemes will be merged following a technical consultation.

However, despite the plan to simplify the regime with a single, merged R&D Tax scheme, there will still be two schemes in operation as R&D intensive, loss-making SMEs will have to claim under a separate ‘SME Intensive’ scheme.

Businesses will need to claim under the new schemes for expenditure incurred in accounting periods beginning on or after 1st April 2024. These reforms are being legislated for in the Autumn Finance Bill which is being published this week.


Merged R&D Tax Scheme

The merged scheme aims to simplify the system with an aligned set of qualification rules whilst providing greater support for UK companies to drive innovation. It also removes the situation where companies have to transition between the SME and RDEC schemes. The key changes which were announced are as follows:

  • Enhanced terms for loss-making companies will see the rate at which they are taxed within the merged scheme reduce from 25% to 19%
  • Claimant companies will no longer be able to nominate a third-party payee for payment of claims and with immediate effect, no new assignments can be set up
  • R&D relief can only be claimed by the company making the decision to do R&D and taking on the risk. An exception to this is that a sub-contractor would be able to claim for R&D instigated by a non-UK-taxpaying customer or an organisation that isn’t subject to UK corporation tax
  • Restrictions on subsidised expenditure will be removed meaning claims for R&D that has been subsidised or supported by grant funding will not be reduced


SME Intensive R&D Tax Scheme

Following on from the Spring Budget where it was announced that loss-making companies who meet certain criteria can benefit from an enhanced rate of relief, the new SME intensive scheme is set to further improve these terms and allow more businesses to benefit.

Announced in Spring Budget – For activity incurred from 1st April 2023 loss-making SMEs for whom R&D expenditure accounts for 40% of total expenditure can claim an enhanced rate of relief.

Announced in Autumn Statement – For activity incurred in accounting periods beginning on or after 1st April 2024, SMEs for whom R&D expenditure accounts for 30% of total expenditure can claim an enhanced rate of relief. A one-year grace period is also being introduced, allowing companies who dip under the 30% threshold to continue to receive relief for one year.

Qualifying businesses will be able to claim for expenditure incurred from 1st April 2023 once the Autumn Finance Bill 2023 has received Royal Assent, with the reduction in intensity threshold and grace period coming into effect for accounting periods beginning on or after 1st April 2024.


Following on from the announcement of these changes, the government is still looking to develop the enhanced support for R&D intensive SMEs, and to consider further simplifications. An action plan to reduce the high levels of non-compliance will also be published in due course.

A technical note sets out the main changes to the proposed merged scheme and the SME intensive scheme.


If you need any guidance on how these changes affect your business, please contact us for a free consultation.