HMRC have recently confirmed changes to R&D legislation, following on from consultation results released in December 2021 (https://www.richardsons-group.co.uk/rd-consultation-results/)
These will come into effect for accounting periods beginning on or after 1 April 2023.
The main focus of the changes is to tackle abuse of the R&D tax credits system and to refocus reliefs towards UK innovation.
To summarise the main changes from the announcement:
- Qualifying expenditure now includes the costs of datasets and cloud computing, the definitions are as below:
- A data licence is a licence to access and use a collection of digital data
- Cloud computing services include the provision of, access to, or maintenance of, remote data storage, operating systems, software platforms or hardware facilities.
- Only subcontracted work and external workers provided by companies/businesses in the UK will be available to be included in an R&D claim.
- There will be some limited exemptions based on factors such as geography, environment, population, or other conditions that are not present in the UK that are required for research.
- There will also be exemptions where there are regulatory or other legal requirements for certain activities to take place in specific territories, for example clinical trials.
- Cost or time will not be an exemption for not using UK subcontractors.
- Further details will be required alongside all submissions. At Richardsons we produce an R&D report which covers the information highlighted by HMRC, as well as being able to give advice to ensure that claims made meet the requirements set out by HMRC.
- New claimants will need to inform HMRC that they plan to make a claim in advance. This will be done using a digital service, and will need to be submitted within 6 months of the end of the period to which the claim relates to. If a company has not made a claim in any of the 3 periods beforehand, they will also have to pre-notify.
Further information from HMRC can be found at https://www.gov.uk/government/publications/research-and-development-tax-relief-changes/research-and-development-tax-relief-reform
If you have any queries on any of the points raised above, please get in touch with your usual contact at Richardsons or speak to a member of our R&D team.