Are You Ready For The R&D Tax Credit Reforms?
After the review of the R&D tax credit incentive, the HMRC has announced several reforms, which will come into effect in April 2023 and include a crackdown on fraudulent claims, refocus on UK based innovation and the welcomed introduction of data and cloud computing R&D costs.
The reforms will make the initiative more competitive, well-targeted and supportive of legitimate innovation claims.
Tackling Abuse and Improving Compliance
- More detailed explanations on what the claim expenditure was for, the technical advancement being sought, uncertainties that were faced and how they were overcome.
- New cross-cutting team will focus on claim abuse.
- HMRC has to be informed in advance of a claim, they will be submitted digitally, endorsed by a senior company officer and include details of any third party advisors.
Refocus on Innovation Based in the UK and Not Overseas
- Third-party subcontractors must perform the work in the UK.
- Externally provided workers (EPW) must be paid via a UK Payroll.
- Software, consumables, clinical trial volunteers, data and cloud can still be sourced from overseas.
Data & Cloud Computing Costs will be Included in the Qualifying Expenditure
- Dataset licence payments for a qualifying R&D project (with no resell or sharing rights).
- Staffing costs to collect, cleanse and analyse data for a R&D project.
- Direct R&D cloud computing service costs (not general overheads) e.g. processing, analytics, software etc.
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