Following a long consultation period, qualifying expenditure for R&D tax credits will expand to include data and cloud computing costs, as announced by Chancellor of the exchequer Rishi Sunak at the recent Autumn budget.

This is a positive outcome for innovative UK companies. This addition captures the evolvement in research and development activities since the relief’s inception.

Matthew Jones, managing director at LimestoneGrey commented:

‘The inclusion of data and cloud computing costs as qualifying expenditure is a welcomed change. Data acquisition costs in particular can be extremely expensive for businesses and can be vital for a favorable R&D result.

Since the relief’s inception, there has been a clear shift in the way in which R&D is performed, and it is only right and fair that the list of qualifying expenditure is brought in line with the modern way.’

Further budget announcements affecting R&D tax credits

During his budget speech, Rishi Sunak also touched on the idea of the UK becoming more innovatively, technologically and scientifically competitive in comparison to our OECD counterparts.

Noting that our developmental and private sector investment in research and development levels are not where they should be, the Chancellor announced that the Government will look at ways to encourage domestic spending on R&D.

An issue identified with the current R&D tax credit relief system is that whilst 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 within the UK, with the current system allowing companies to claim for R&D activities taking place overseas. From April 2023, the government will look to refocus the reliefs towards innovation taking place within in the UK.