Chancellor Rishi Sunak’s Spring Statement on Wednesday 23rd March has provided us with further details of some of the changes to come as part of the R&D tax relief reform which was launched at Spring Budget 2021 and which will come into effect from April 2023.  Whilst today’s statement mostly covered further details of measures previously announced we welcome the expansion of the definition of R&D to include pure mathematics, and are interested to see how far the Chancellor will go in the Autumn in levelling up the SME and RDEC schemes.

The key points relating to R&D arising from the Spring statement are:

Data and Cloud Costs – All cloud computing costs used for R&D, including storage will be eligible for R&D relief.

Refocussing relief on UK Activities – Whilst the government has confirmed they remain committed to refocussing support on R&D undertaken in the UK they have indicated they will act on feedback from the consultation process that in some cases it is necessary for R&D to take place overseas.  As such legislation will be put in place allowing expenditure on overseas R&D for the following:

• Material factors such as geography, environment, population or other conditions that are not present in the UK are required for the research
• Regulatory or other legal requirements that the activities must take place outside of the UK – i.e. clinical trials

Expanding the definition of R&D – The definition is to be expanded to clarify that work in relation to pure mathematics is a qualifying cost, providing valuable support for growing sectors such as AI, quantum computing, and robotics.

RDEC Rate – The current RDEC rate will be reviewed to ensure effective targeting of the UK’s relief to boost R&D investment in the UK,  potentially rebalancing the schemes and making the RDEC more competitive internationally.

Improving Compliance – The government has reiterated its commitment to tackling abuse of the of the R&D tax reliefs, particularly the SME scheme through the introduction of a new cross cutting HMRC team focused on tackling abuse of R&D reliefs.

Sign up for our R&D tax webinar this Summer ’22.

With the imminent shake up of the rules surrounding R&D we will be hosting a webinar in the Summer as soon as we have the details from HMRC. If you’re interested and want to learn more, you can pre-register here.