The give and take of R&D relief - PKF Francis Clark
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The give and take of R&D relief

The Spring Budget this year saw the launch of a consultation document into various aspects of the UK R&D tax relief.  Following the consultation, it was announced at the Autumn Budget that there would be three areas of reform which will see an overhaul of the R&D tax regime with effect from April 2023.

The qualifying expenditure categories to which R&D tax reliefs apply is widened to include data and cloud computing to update the relevance of the relief for modern research techniques which have changed significantly since the relief was first introduced in 2000 and then re-defined in 2004.

There is currently no restriction on the location of the qualifying R&D activities; subcontracted costs may be undertaken overseas. In an attempt to ensure that the UK taxpayers’ contribution to providing this relief is best targeted at providing the best results for the UK overall, availability of the relief will be restricted to expenditure on UK R&D activities only from April 2023.

Extra measures are being looked at to stop the abuse of the system. We are aware that HMRC are looking at claims more closely and opening enquiries. They are also allocating additional resource to assist with this.

HMRC intend to make the following changes:

  • All claims for R&D reliefs, either for a deduction or a tax credit, will in future have to be made digitally (except from those companies exempt from the requirement to deliver a Company Tax Return online)
  • These digital claims will in future require more detail – for example, on what expenditure the claim covers, the nature of the advance sought, the field of science or technology and the uncertainties that have been overcome
  • Each claim will need to be endorsed by a named senior officer of the company
  • Companies will need to inform HMRC, in advance, that they plan to make a claim
  • Claims will need to include details of any agent who has advised the company on compiling the claim

The overseas third party change will affect a number of businesses, especially software companies. The level of detail that will need to be submitted with the claim will also affect businesses who prepare their own claims. If you have any questions on these announcements, or any R&D question – please do contact us.

For more Autumn Budget analysis, visit our Budget hub.

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