Last month, the budget saw several future changes for the current UK R&D tax relief schemes. Any company that is currently claiming or intending to claim should consider the upcoming changes as they could have a significant impact on whether you are eligible and/or the amounts you would receive.
The first big announcement is the long-awaited change that the cost of cloud computing and hosting will now become a qualifying cost. This is a welcome change and finally reflects the reality that technology has significantly moved on since the establishment of the scheme many years ago. Around the turn of the millennium, most software was bought on a CD or similar media, with most companies owning their physical servers. Times have, of course, changed and the advent of software as a service, hosting, and cloud services mean that what does and does not constitute software has become increasingly blurred, meaning that costs somewhat akin to the software of 20 years ago have not qualified.
These changes are therefore to be welcomed and will provide considerable relief to start-ups and other small companies who are increasingly reliant on the likes of AWS or MS Azure to develop their software platforms.
The devil, as always, will be in the detail, with the exact legislation not yet published. We expect this to be in the 2022/23 Finance act, which will most likely be published in March next year.
Less anticipated, but not a complete surprise, was the announcement that R&D reliefs are to be refocused on providing relief on work done within the UK. This should not have been a complete surprise, as the reintroduction of the PAYE cap was a clear first step in that direction. Nevertheless, this announcement is something that will be a concern to businesses who make use of outsourced services as part of their R&D efforts, including the considerable software development taking place in lower labor cost countries like India, Pakistan, or Eastern Europe. In pharmaceutical research, the scale of animal and clinical testing of potential drugs means that tests often take place in multiple locations around the world. In the Covid era, where the rapid development of vaccines and other therapies has never been more important, anything that makes this harder must be viewed with some circumspection.
Once again, we do not know the full details of what this will mean in practice, so we look forward to the Government releasing further information on the consultation and the next steps.
Specialist R&D tax consultancies exist to assist companies in navigating the changing legislation and help in maximizing the funding available to you from HMRC. These specialist organizations like Walmer Group, can guide your company and position you with how your future R&D tax claims could look going forward. With Walmer Group’s R&D tax experience, we are well equipped with assisting and steering around the somewhat minefield that is the R&D tax legislation, with our ex-HMRC personnel, and consultants that have successfully claimed over £30 million of R&D tax claims.
Please do get in touch if you have any queries or concerns.
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