The Government has published draft legislation proposing the two existing R&D tax relief schemes be merged into one.

This single R&D tax relief would be delivered as an expenditure credit, incorporating aspects of the existing SME R&D tax relief and R&D expenditure credit schemes.

The legislation, which considered responses received in a consultation that ran from January 2023 to March 2023, is now open to technical feedback.

The Government said it is yet to decide whether to merge schemes, "but intends to keep open the option of doing so from April 2024".

"This [the merger] would present significant opportunities for tax simplification, including having a single set of qualifying rules, being able to remove the exceptions for subcontracting to certain types of entity, known as ‘qualifying bodies'," the Government said.

Ellen Milner, director of public policy at the Chartered Institute of Taxation, said that despite the Government saying it has not made a decision, "the publication of draft legislation suggests this is more likely than not".

She continued: "We remain concerned that planning for a merger of the schemes in April 2024 is overly ambitious.

"The current pace of change in the R&D relief regime is already challenging for businesses and their advisers, with these proposed changes coming on top of others in the Finance Act passed last week as well as serious ongoing problems around the compliance process for the relief."

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