Chancellor shows his support for continuation of the R&D tax relief scheme
In this latest Member’s Briefing article, Member company and Innovation Funding specialists ABGI-UK shed light on recent developments in the R&D tax relief scheme.
Despite rumours over the last few months of significant changes to the R&D tax relief scheme, the Chancellor’s spring statement made only a brief reference to the scheme. It’s clear that the Government is frustrated at the level of business investment in R&D in the UK – which (as a % of GPD) is less than half of the OECD average. Despite the UK spending more on tax reliefs than almost every other country, the chancellor is clear that “something is not working” and he has indicated that HM treasury will be looking to make changes to the scheme in the future to provide greater value for money. Other than this most of his comments on the scheme lent clarification to previous statements of intention
He confirmed the expansion of the reliefs to include all data and cloud computing, initially made in autumn 2021, but has also included all mathematics. This will allow companies to claim for costs related to the acquisition, analysis and storage of vital data. Not only is this a boost for a wide range of sectors such as artificial intelligence, geospatial services, life sciences and quantum computing but will also provide additional support to manufacturing where the “modernising manufacturing” agenda drives greater and greater reliance on the use of data throughout R&D, design and innovation, including digitalisation and automation projects.
He has provided clarification on relief only being available to subcontracted R&D activity carried out in the UK. The government now recognises that there are cases where it is necessary to undertake R&D outside of the UK and so will legislate so vital R&D undertaken by businesses based in the UK can continue to qualify for tax reliefs where there is a material or regulatory requirement for this work to be carried out overseas.
For those companies claiming through the RDEC scheme the Chancellor is also considering whether to make the RDEC scheme more generous – rebalancing it with the SME scheme and making RDEC more internationally competitive.
Addressing abuse of the R&D tax relief scheme, particularly in the SME scheme, clearly remains a focus for the Government, having announced in November the creation of a team, working across government departments, focused on tackling abuse back in November. ABGI welcomes these announcements which expand the scope of the schemes to further incentivise innovation. We particularly welcome the ongoing focus on tackling the abuse of R&D tax reliefs to ensure they are effective and deliver the best possible value for taxpayers and will continue to work with HMRC on future reform.
If you have any questions relating to R&D tax relief or wish to discuss the implications of recent changes to the R&D tax relief scheme on your own company’s claim please contact Sandy Findlay on 07807 739033 or email firstname.lastname@example.org
ABGI is a global consultancy with over 30 years’ experience helping some of the world’s best known brands accelerate innovation and business expansion by capitalising on their R&D activities, in compliance with all rules and regulations. They have extensive experience helping companies leverage valuable funding back into their business through government-backed incentives such as grant funding, R&D tax relief, Capital allowances or Patent Box.