Chancellor Rishi Sunak delivered the 2022 Spring Budget, announcing a reform of the R&D tax relief scheme in a bid to improve innovation and productivity in the UK. There were several key areas of expansion of the scheme which demonstrates the government’s intention to help drive economic growth and ensure the UK remains at the forefront of cutting-edge innovation.
So what are the changes impacting R&D Tax Relief?
- All data and cloud computing costs associated with R&D, including storage, will qualify for relief. There has been a significant move towards utilising cloud services in recent years as technology is advancing, so this will be incredibly beneficial to companies engaged in data heavy activities.
- Allowable expenditure on overseas R&D activities will qualify where there are:
- material factors required for the research e.g. research depending on geographical factors such as weather conditions that are not present in the UK.
- legal or regulatory requirements that R&D activities must take place outside of the UK.
This will help companies that have no viable alternatives for R&D in the UK to undertake certain R&D activities.
- Pure mathematics will be included in the scope for R&D tax relief and will be considered as a qualifying cost. These changes will support a number of sectors such as AI, quantum computing and robotics to name a few.
- The government will consider increasing the RDEC regime to boost R&D investment in the UK.
- The government are looking at further ways to tackle abuse of the tax relief in the SME sector. The Government created a new cross-cutting HMRC team focused on dealing with abuse of tax reliefs.
The new measures are intended to take effect from April 2023. The changes unveiled to further expand the R&D tax relief scheme will benefit many companies and help them to grow. It is expected that further announcements and a wider review will be made in the Autumn 2022 budget.
The GOV.UK website has the full text of the Spring Statement 2022.