We look at what changes are forthcoming for R&D tax relief and capital allowances.
R&D Tax Relief
Following the consultation launched at Spring Budget 2021, R&D tax reliefs will be reformed:
- to support modern research methods by expanding qualifying expenditure to include data and cloud costs,
- more effectively capture the benefits of R&D funded by the reliefs through refocusing support towards innovation in the UK, and
- target abuse and improve compliance.
These changes will be legislated for in the Finance Bill 2022-23 and will take effect from April 2023.
Further details of these changes and next steps for the review will be set out as part of the government’s further tax administration and maintenance announcements later in the autumn.
Overseas R&D Expenditure
In addition, The Chancellor also hinted that costs relating to overseas R&D expenditure may be restricted in the future.
While UK companies claimed tax relief on £47.5 billion of R&D expenditure in 2019, the ONS estimates that businesses only carried out £25.9 billion of privately financed R&D in the UK.
This gap is partly explained by companies being able to claim for activity taking place overseas. This suggests that the UK is not effectively capturing the benefits of R&D funded by the UK taxpayer through the reliefs.
To more effectively capture the benefits of the reliefs, including improved skills, know-how and understanding, the government will refocus the reliefs towards innovation in the UK.
As expected, the government will also set out plans to tackle abuse of and improve compliance with the R&D tax reliefs later in the autumn.
R&D Tax Relief: Capital Allowances
The budget confirmed that the Annual Investment Allowance will remain at £1,000,000 annually until 1st April 2023, instead of dropping down to £200,000 on 1st January 2022 as previously planned.
Together with capital allowances super deduction announced in the March 2021 Budget, the run up to April 2023 remains an excellent time to invest in capital projects and assets.
In many cases, most relief will be obtained using the super deduction and Annual Investment Allowance in combination, depending of the specifics of the business and expenditure.
How Onyx Accountants Can help You
Our knowledge and expertise in this sector is vast. Wondering if your business would qualify for R&D Tax Relief?
If you would like to discuss your scope to claim we would be delighted to help. We can even assist in relation to the claims you already make,
Our Tax Specialists are able to segregate new expenditure and also unlock unclaimed historic expenditure. Our aim is to achieve the full extent of available tax savings.
Whether you are making a claim or not, there isn’t a question we can’t answer about this sector. We undertake complimentary reviews to ensure you are maximising the opportunity, so whatever your circumstances, please get in touch!
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