The Autumn Budget announcement is presented each year by the Chancellor of the Exchequer (in this case, Rishi Sunak) and gives the country an idea of how money is going to be spent and where changes are being made in a variety of different areas.

Last year’s budget was no different, with the announcement on 27th October bringing with it a multitude of changes that impact businesses as well as individuals.

While the R&D tax scheme has been in place since 2000, there have been many updates throughout the years to how it works, who can claim and what can be claimed for. This last budget has brought about more changes than ever before, with greater investment in innovation and more eligible activities taking centre stage. Many of these changes came about from a consultation that took place during the Spring Budget in 2021 after potential areas for improvement were highlighted.

Changes relating to the R&D tax credits scheme

Aligning tax credits with innovation carried out in the UK The chancellor announced that future R&D claims will be focusing on innovation carried out within the UK, removing the ability to claim for R&D work that is subcontracted worldwide. This has an obvious benefit of improving knowledge, skills and progression within the UK, however could have a negative knock-on effect for R&D carried out overseas.

An increase in R&D investment In line with the new goal of increasing R&D expenditure to 1.1% of GDP, Sunak announced a £20bn investment in R&D by 2024/25, well above the 0.7% average of the 2018 Organisation for Economic Co-operation and Development (OECD). He has announced that this will culminate in a target of £22bn annual R&D investment by 2026/27.

Expansion of qualifying criteria relating to software usage With a huge range of businesses now more reliant than ever on cloud computing and data storage facilities, the Chancellor announced that these could now be included as qualifying expenditure for R&D claims. While the precise detail has not been released, this has been a long-time coming with many industries previously calling on HMRC to make this change.

An extension to the temporary Annual Investment Allowance of £1m The temporary Annual Investment Allowance (AIA) from £200k to £1m for expenditure on plant and machinery costs was introduced in 2021 and was due to end in December last year, however this has now been extended to March 2023 to help stimulate R&D work in the medium term.

How will these changes affect your claim?

The exact effects that these changes will have are, as yet, unclear, however we should know more after the Finance Bill 2022-23 is released as this will be the first opportunity for these plans to be legislated.

As HMRC allows qualifying R&D to be taken into account for up to two years after your business’ accounting period, the work that you’re doing now will be affected by the new rules, and so it’s vital that you take this into account with any work that is taking place at the moment. This includes anything that is being carried out overseas, as you may not be able to include this in the future.

How can Taxar Innovation Partners help?

We pride ourselves on our collaborative approach to completing your R&D claim, using our industry knowledge and expertise to help you develop and implement an innovation strategy that dovetails with your operational activities and financial performance.

We also offer a unique strategic partnership function which allows you to develop and deliver your innovation strategy, including any technical development which is needed to do this. We combine our tax experience with a systemic approach to innovation, helping you to accelerate your success and get the results you want.

You can find out more about our strategic partnership approach on our website.

If you’d like to speak to us about your R&D claim, please get in touch using our contact form.