Research & Development changes – what you can do now!

Budget, HMRC, Research & Development,

In the recent Spring Statement, the Chancellor announced plans to reform the Research & Development (R&D) tax regime to maximise the innovation and growth that comes from the expenditure. Draft legislation is expected in the summer of 2022, with changes likely to take effect in April 2023.

What can you do now?

1 Overseas R&D

It has already been announced that funding will be concentrated on UK based activity. The Spring Statement did confirm however that there will be some exceptions. If there are material factors such as geography, environment or regulatory reasons why activity cannot take place in the UK, there may be a chance to continue to claim for those costs.

Now is the time to review your non-UK activities and to prepare for the possible options. It may be that they will be specifically excluded, but you equally may be able to apply to include them on a case by case basis. Spend some time now in looking at the specifics in your business so you know your options when the time comes.

2 Cloud Computing

It has previous been announced that qualifying expenditure will include certain cloud computing costs, but the Spring Statement gave us some more detail. It confirmed that all cloud costs associated with R&D will be eligible, including data storage.

One job to do over the coming months is to work out what proportion of these costs can be apportioned to R&D.

3 Pure Maths costs

The definition of R&D is to be expanded to include Pure Maths as a qualifying cost. In this situation, Pure Maths will include sections including Artificial intelligence, Quantum computing and robotics.

The next year will give you a chance to break out these costs if you have them, so they can be included in future claims.

4 Increased Evidence

We already know that HMRC are looking more carefully at R&D Claims that are being submitted. This is only likely to increase. Areas that may receive additional attention could be:

  • The duration of the R&D project and development options.
  • Associated capital investments.
  • Patents or other recognitions for outcomes.

Reporting and analysing is never popular, but with R&D there is a genuine benefit to doing so. If you’d like to discuss your internal reporting or monitoring in good time for the reforms, please get in touch. We’re here to help!

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