Warning Issued by ForrestBrown: UK R&D Tax Relief Changes Pose Challenges for Accountants

ForrestBrown, a consultancy specializing in tax credits, has cautioned about the forthcoming alterations to the UK's research and development (R&D) tax relief scheme. The firm, known for its 120-strong team of experts, has expressed concerns that accountants may feel ill-prepared for the changes scheduled to take effect from April 2024.

Under the new legislation, the existing R&D expenditure credit and SME schemes will be amalgamated into a unified R&D tax relief incentive. This amalgamation aims to simplify the incentive while promoting more R&D activity and addressing fraudulent claims.

However, with only a brief four-month implementation period before the changes come into effect, ForrestBrown suggests that some accountants may not be adequately prepared for the transition. The merged scheme will operate at a headline rate of relief of 20%, impacting claims where R&D is contracted between parties.

Moreover, restrictions on overseas R&D are also on the horizon, affecting accounting periods beginning on or after April 1, 2024. The consultancy emphasizes that accountants need to comprehend the implications of these changes for their clients to provide effective advice.

Kelly Oakley, Associate Director and Chartered Tax Adviser at ForrestBrown, underscored the significance of these reforms, noting that they represent the most extensive changes to R&D tax relief to date. Oakley emphasized the importance for accountants to develop strategies to manage the increased workload and risks associated with the revised scheme.

ForrestBrown's team comprises qualified chartered tax advisers, accountants, lawyers, industry sector specialists, and former HM Revenue and Customs (HMRC) inspectors. Their expertise positions them well to navigate the complexities of the evolving R&D tax relief landscape.

The warning from ForrestBrown comes in the wake of recent developments in the R&D tax credit advisory sector, including the collapse of UK-based firm RDI Solutions. While there is no implication of wrongdoing on RDI's part, concerns about error and fraud in the R&D tax relief program have been raised by HMRC, with estimates suggesting losses exceeding £1 billion.

As the April deadline approaches, it is imperative for accountants and businesses alike to familiarize themselves with the changes to the R&D tax relief scheme to ensure compliance and maximize the benefits available under the revised incentive.

By fLEXI tEAM