Should the scope of eligibility for R&D tax credit to be widened?
In a recent report Untapped Investment the Confederation of British Industry (CBI) warns “at the current pace of R&D investment, UK is estimated to miss the target by £19 billion in 2027”.
The CBI report highlights that “Businesses are changing the way they conduct R&D, from an increasing use of data and analytics, to outsourcing R&D activity to specialists” and the R&D schemes need to keep pace.
In their report Untapped Investment CBI suggest that for the R&D tax relief and credit schemes “The scope should be broadened to include the following:
- Capital expenditure;
- Data-driven innovation;
- Outsourced R&D activities that do not currently qualify; and
- Upskilling and retraining of staff.
The government should review the availability of data on R&D expenditure to ensure the effectiveness of the R&D tax credit continues to be monitored appropriately.”
Interestingly a prominent policy group, The Coalition for the Digital Economy, that claims to be the voice of tech startups and scaleups, in their paper Credit Where Credit’s Due, made a similar case.
They made several recommendations including that the purchase of data should be considered a consumable, cloud services should be claimable (e.g. cloud server costs), as should costs of UI/UX (user interface and user testing). These are all very common areas when claimants get it wrong and include costs that are ineligible.
Of course as an advisor I’d welcome a widening of the scope but the issue is that what may seem to be small and logical changes on the surface would in some cases require sweeping changes in legislation. It may also add complexity rather than simplify the rules when the same thinking is applies across all industries.
Like every government scheme, there is a lot of background legislation that has to be adhered to. Inevitably it’s all tied into accounting rules and that is where the complexity comes in.
Are you ready to find out if you qualify or how much your R&D claims could be worth?