The Chancellor recently announced the Autumn 2021 budget and outlined the UK’s economic road to recovery from the pandemic. Since Covid-19 has heavily loomed over all the economic and financial decisions in the past two years, this budget was much awaited by businesses and individuals, to know the government’s agenda for growth and renewal going forwards. Among other things, the Chancellor reiterated the government’s commitment towards bringing more investment and encouraging innovation in all industries, especially healthcare and technology. While the R&D Tax Credit scheme primarily remains as it is, there were a few changes announced in the budget that could impact the way businesses conduct R&D and make R&D Tax Credit claims.
Changes to the R&D Tax Credits Scheme in the Autumn Budget 2021
The government aims to increase R&D expenditure from 0.7% (2018) to 1.1% of GDP. In addition to the R&D Tax Relief, the Chancellor maintained the target of committing £22Bn for R&D investment per year by 2026/27, with a target of £20Bn per year by end of this parliament in 2024. In terms of the R&D Tax Credit scheme itself, the following two changes are to be made:
- From April 2023, the eligible expenditure criteria will be expanded to include Cloud computing and data storage costs, following calls from several industries that spend substantial amounts on Cloud and storage.
- The R&D Tax Relief, which was available to businesses for worldwide costs, will only be available for R&D conducted in the UK.
Apart from these specific changes, the Chancellor also announced several measures that can positively impact businesses that seek innovation and carry out R&D, such as:
- Increase in core funding to Innovate UK and taking their yearly budget to £1bn per year.
- Setting up a new Advanced Research and Invention Agency and providing £800m of support by 2025/26 to support high-risk, high-reward research.
- Increase in the Skills spending of £3.8Bn over the parliament.
What Do These Changes Mean for Businesses?
The R&D Tax Credits scheme will continue to encourage and support innovation in the UK. It sits well with the government’s Net Zero strategy, which will expand the country’s innovation capabilities and increase employment and investment in the coming years. The expansion of the qualifying costs criteria will allow more businesses to claim cashback for their R&D, and in turn, lead to more innovation across all industries. The changes would also fuel the development of a high skill economic environment that includes more innovative businesses and trained professionals than before.
Overall, businesses that conduct R&D have a lot to gain in the coming years as the UK economy recovers and restabilises. If you would like to know more about R&D Tax Credits and how they can benefit your business, call the Datafox R&D Tax experts on 0800 035 2510 or email us at email@example.com.