UK Budget - Autumn 2021

CHANGES TO R&D TAX RELIEF:

On the upside, the categories of qualifying expenditure will be expanded to include data and cloud computing costs.

However, it is disappointing that this change will not take effect for another 18 months - in April 2023.

On the downside, there was a clear statement of intent that R&D Tax Relief will be "refocused" to support only R&D actually undertaken in the UK. This will hit those companies who subcontract some of their R&D overseas.

However, as this change is not expected to take effect until April 2023, this gives a window of 18 months for those companies affected to complete their overseas R&D.

LOOKING AHEAD:

The Government is currently undertaking a comprehensive review of R&D Tax Relief, including a consultation launched by HMRC in March 2021.

This week's Budget gave no detail on the two proposed changes that were specifically mentioned (see above) and no update on the Government's review. however, it did indicate that more information will be set out in due course.

It wouldn't be a surprise if further changes are announced over the course of the next year, followed by a swathe of new legislation effective from April 2023.