R&D Tax Credits scheme extension

28 April 2022

Chancellor Rishi Sunak announced that from April 2023, costs from data and cloud computing as well as pure maths will be eligible for R&D expenditure.

advice : Tax

Last month Chancellor Rishi Sunak delivered Spring Statement 2022 which revealed some timely updates to the Autumn Budget 2021. The statement addressed various difficulties the UK businesses and the population as a whole are facing due to the recent uncertainties – such as rising inflation, health and energy crises.

Autumn Budget 2021 announcement

In October 2021, Chancellor Rishi Sunak announced that from April 2023, costs from data and cloud computing will be eligible for R&D expenditure. He also revealed that R&D relief will be limited to work undertaken in the UK only. The reason for this decision, was because in 2020 companies claimed UK tax relief on £48bn of R&D spending but UK business investment was around half of that, at just £26bn.

R&D Tax Credits updates from Spring Statement

It was highly expected to get more information about R&D Tax Credit’s upcoming reform but Rishi Sunak didn’t share a lot about his future plans.

However, he did confirm that upcoming changes to the R&D Tax Credits scheme will come into effect in April 2023 and the scheme will be extended to include:

  • Cloud computing costs;
  • Data storage costs;
  • It will also include pure maths

The new announcement was to allow pure mathematics research as qualifying R&D expenditure – such as in sectors of AI and robotics together with manufacturing and design.

Most of Rishi Sunak’s announcements were already known but he reiterated the Government’s commitment to continue fostering innovation in the UK but will allow for R&D relief for overseas costs such as:

  • Material factors such as geography, environment, population, or other conditions that are not present in the UK but are required for the research (for example deep ocean research);
  • Regulatory or other legal requirements that activities must take place outside of the UK (for example, clinical trials)

The draft of this new legislation will be reviewed over the summer of 2022. We are expecting to hear more about those updates during the next Autumn Budget. The Chancellor also noted that a more generous R&D Tax Credit scheme would be considered as part of the Autumn budget.

R&D Tax Credits benefits

The Research and Development Tax Credit scheme was launched over 20 years ago to encourage the growth and innovation of young businesses. This tax scheme provides valuable support for start-ups and is aimed at encouraging global competitiveness. SMEs can reclaim up to 33% of the amount spent on Research and Development even when they are making a loss. 

R&D Tax Credit relief could be the financial lifeline for many start-ups but tax rules are complex and can be difficult to navigate. Find out more about the scheme in our recently published guide with Finerva’s Co-Founder and R&D Tax Credits specialist, Ben Rule. For more information, please sign up to our I am a Founder newsletter or subscribe to our LinkedIn where we will announce any news announcements as they come. 

Nothing on this page is intended to be or should be construed or taken as accountancy, investment, tax or any other kind of advice. We recommend individuals and companies seek professional advice on their circumstances and matters.