R&D Merged Scheme

In the 2023 Autumn budget, it was confirmed that a new merged R&D tax relief scheme would be implemented in the new financial year which begins on April 1st 2024.

This is a huge change for R&D tax credit incentives in a very short window of time so it is vital to prepare yourself for these changes so that you can still benefit from R&D tax credit relief in 2024.

What Is The Merged R&D Scheme?

The merged R&D scheme brings together the two current UK R&D tax credit schemes (the SME scheme and the RDEC scheme) under a singular scheme. This single scheme sees enhanced tax relief and credits for qualifying SME expenditure and R&D expenditure credit (RDEC) for large businesses, SME subcontractors and subsidised R&D expenditure.

The new R&D merged scheme is sometimes referred to as the ‘R&D single scheme’ or ‘simplified scheme’. It will be implemented in a similar way to the existing RDEC scheme.

Man explains SDLT Refunds to client

Merged Scheme


If you claim or are planning to claim R&D tax relief it is likely that you will be impacted by the introduction of the merged scheme. 

The intention of the merged R&D scheme was intended to simplify the system and make the UK’s R&D tax credit system much more similar to many European countries R&D tax credit systems.

However, there are still some differences in the merged scheme that you will need to be aware of depending on what type of business you own and what kinds of contractual arrangements you are carrying out R&D projects under.

If you own an SME then you must associate with either the R&D-intensive incentive or the new R&D merged scheme. SMEs must have less than 500 members of staff to be eligible to claim as an SME for R&D tax credits.

You may also have to consider if R&D projects are carried out by your business or by other associates within the business pool. Generally, a business cannot claim for R&D if R&D projects have been contracted to them.


The main intention of R&D tax credit incentives is to aid private-sector innovative investments which benefit the UK economy by boosting productivity and growth. 

Several changes to R&D tax credits have been implemented since 2021 which claim to simplify the tax credit incentives and protect the system from abuse. 



The merged R&D scheme will apply from 1st April 2024 which marks the new financial year and all accounting periods after this date. Notably, this is not for any expenditure incurred from the beginning of April as was initially proposed.

How Will the merged scheme be implemented?

The merged R&D scheme will be implemented in a similar approach to the RDEC scheme, however, there are some key differences:

An Above The Line Expenditure Credit: All businesses, regardless of size (with the exception of SMEs that fall under the R&D-intensive incentive) will receive an ‘above-the-line credit’ under the new merged R&D scheme. This is a credit that can be balanced against your taxes.


How Does The Merged R&D Scheme Differ From The RDEC Scheme?

There are some significant differences between the merged R&D scheme and the current RDEC scheme. These differences are usually where the current SME schemes have been incorporated into the merged R&D scheme. The most significant difference is the rules for contracted R&D projects.

Businesses that currently claim under the RDEC scheme should be aware of the following changes:

  • PAYE/NIC – The merged R&D scheme notes a more generous version of the payable credit cap that can be found in the current SME scheme.
  • Overseas R&D – There are now limitations on relief for overseas R&D expenses especially regarding EPWs and subcontracted R&D activities, if the R&D activity can be replicated within the UK then it cannot be claimed for.

Key Components Of The New R&D Merged Scheme

  • Definition of R&D – The core definition of R&D remains the same. Businesses must be able to demonstrate that their R&D activities have aimed to make progress in science or technology for the R&D expenses to be claimed back.
  • Rates of Relief – A unified relief rate of 20% with an added net benefit of 15% has been proposed for the new R&D merged scheme. This is calculated by using the main rate of corporation tax. A special relief rate of 27% for businesses that fall under the R&D-intensive scheme will continue alongside the new merged R&D scheme.
  • Loss Cap Rules – SME schemes have had very generous loss cap rules which have been incorporated into the new R&D merged scheme. The national tax rate applied to loss-making businesses in the new merged scheme will be the small profits rate of 19% rather than the 25% main rate that was set out in the RDEC scheme.
  • Subcontracted R&D Activities – The new merged R&D scheme will allow broader claims to be made for outsourced costs on R&D activities, which is similar to the current RDEC scheme.
  • Subsidised R&D Activities – Subsidised R&D expense rules in the current SME scheme will NOT apply to the new merged R&D scheme. This means that if a company receives a grant for R&D costs the relief will not be reduced.
  • Overseas R&D Activities – A proposed ban on claiming for overseas R&D activity will be incorporated into the new merged R&D scheme.

How Can CapEx Tax Help You Claim Under The Merged R&D Scheme?

The merging of the two current R&D schemes will impact a wide range of businesses that are involved in R&D activities. SMEs could see a reduction in the benefits from R&D claims. Additionally, the new rules on subsidised R&D and overseas costs will require careful planning and decision-making for companies that receive grants. If you have been impacted by the changes that will come from the merged R&D scheme then contact CapEx Tax today to gain help and advice from our dedicated team of tax specialists.

"*" indicates required fields

Step 1 of 7