Kirby & Haslam R&D Engineering

Spring Statement 2022: Highlights

The Chancellor’s Spring Statement 2022 is indicative of the future of Research and Development (R&D) and claiming R&D tax credits. Taking precedence, one of the priorities stated is to deliver ‘on the pledge to increase public investment in R&D and doing more through the tax system to encourage greater private sector investment in R&D.’

As part of the governments’ ‘Tax Plan’, they hope to boost growth and increase productivity ‘by creating the conditions for the private sector to invest more, train more and innovate more – fostering a new culture of enterprise.’ Achieving this will come at the hand of cutting and reforming business taxes.

The government has clarified its commitment to growth, through the investment of £20 billion per year in R&D by 2024-25. In keeping with this pledge, from April 2023, all cloud computing costs associated with R&D, including storage, will qualify for relief. Concurrently, ‘the definition of R&D for tax reliefs will be expanded by clarifying that pure mathematics is a qualifying cost.’

Through recognition of the scope of R&D, the government have also laid out necessary guidelines for R&D taking place overseas, ‘so that expenditure on overseas R&D activities can still qualify where there are:

• Material factors such as geography, environment, population or other conditions that are not present in the UK and 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’

With the aim of enhancing innovation, the government are looking into ‘increasing the generosity of RDEC to boost R&D investment in the UK. This would rebalance the schemes and make RDEC more internationally competitive.’

Additional investment concurrently brings additional funding to the compliance process. The government have stated that they are ‘investing £161 million over the next five years to increase compliance and debt management capacity in HMRC.’ Further funding into HMRC staff will focus on tackling abuse of the R&D tax relief scheme, ensuring businesses are liable for the tax they owe.

What this means for R&D and R&D Tax Relief

Further funding into the R&D will continue to boost growth and innovation in the private sector.

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