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Latest R&D tax relief scheme changes, as announced in the Autumn Budget 2021

What was announced in the Autumn Budget 2021 concerning R&D tax credits?

Following on from that consultation reforms that were announced in the Autumn Budget 2021, the government:

  • support modern research methods by expanding qualifying expenditure to include data and cloud costs
  • more effectively capture the spillover benefits of R&D funded by the reliefs through refocusing support towards innovation in the UK
  • target abuse and improve compliance

Today we got more of the detail of these reforms and understood more of the next steps.

How will data and cloud costs be included in the R&D tax relief schemes?

The following new categories of expenditure will be brought into scope:

  • licence payments for datasets; and
  • cloud computing costs that can be attributed to computation, data processing, and software

Government hopes that this modernisation will ensure that the tax reliefs better incentivise cutting-edge R&D methods which rely on vast quantities of data that are analysed and processed via the cloud.

How will R&D tax relief be used to focus on innovation in the UK?

Government proposes to limit relief for payments to subcontractors, in both schemes, to claims where the subcontracted activities take place in the UK. This will help ensure that the spillovers from the research, such as improved skills, benefit the UK.

Similarly, where companies claim for expenditure on externally provided workers (EPWs), these will in future be restricted to EPWs who are within UK PAYE/ NIC.

How will HMRC target its compliance work?

To protect the integrity of the R&D tax reliefs Government has proposed an administrative change that means in the future, companies will need to provide more information when making claims, that claims should all be made digitally and that the intention to claim must be notified in advance.

How will these changes to both R&D tax relief schemes impact GovGrant clients and partners?

The good news is that we are R&D specialists, understanding the detail is our day job. Our clients and partners can rest assured that any change in the qualifying expenditure criteria or claim processing will be understood and applied fully. We will start talking to our clients about the implications and how it will apply to them as part of the process.

We welcome greater scrutiny on overseas R&D as the spillover and additionality is vital to the long-term payback of the scheme. The government has asked for further stakeholder views as to whether there is a case for any narrow exceptions to allow claims on some overseas activity. We will consider this and respond as appropriate.

GovGrant is also reassured that more is being done to protect the integrity of both R&D schemes. There is no place for poor compliance and we already hold ourselves to the highest standards. We believe everyone in this industry should be held to the same account.

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