In the Autumn Statement of 2021, the Government provided details on a series of measures to reform the R&D tax relief system. These measures are intended to ensure the UK’s R&D tax reliefs are as effective as possible and deliver the best possible value for taxpayers.
The measures included the expansion of qualifying expenditures to cover data and some cloud computing costs, as well as excluding R&D activities conducted outside the UK. The Spring Statement yesterday announced further detail on these measures as well as an additional change to expand qualifying expenditure to cover R&D underpinned by pure mathematics.
Yesterday’s Spring Statement R&D highlights include:
- R&D undertaken outside the UK: the government will legislate to enable vital R&D undertaken by businesses based in the UK to continue to qualify for tax reliefs where there is a material or regulatory requirement for this work to be carried out overseas.
- Further elaboration on the inclusion of all cloud computing costs associated with R&D in the scope of the reliefs. This will allow companies to claim for costs related to the storage of vital data, supporting data-heavy research such as genomic sequencing.
- The expansion of the qualifying expenditure to include all mathematics. This reform will support nascent sectors where the UK has a comparative advantage such as Artificial Intelligence, quantum computing and robotics while also supporting strong sectors such as manufacturing and design.
- To ensure the effective targeting of the UK’s R&D relief the government will consider increasing the generosity of RDEC to boost R&D investment in the UK. This would rebalance the schemes and make RDEC more internationally competitive.
- The government will consider what more can be done to tackle the abuse of R&D tax reliefs, particularly in the SME scheme, ahead of Budget 2022. The government announced in November the creation of a new cross-cutting HMRC team focused on tackling abuse of these reliefs. The government is continuing the review of R&D tax reliefs and further announcements will be made in the autumn.
We have a specialist R&D Tax team here at TAP. If you would like to discuss anything related to R&D tax credits for your business please click here to book a time with a member of the R&D team. Alternatively follow this link to view the R&D pages on our website.