In his 2021 autumn statement, the Chancellor announced that the government would refocus support towards innovation spend in the UK, to allow the UK economy to more effectively capture the benefits of R&D funded by tax reliefs. Consequently, going forward, expenditure on subcontracted R&D and the cost of EPWs employed on R&D projects outside the UK would no longer be eligible for UK R&D tax relief.
In his most recent Budget, Rishi Sunak re-emphasised this point but did acknowledge that there will be some circumstances when it will be impossible for companies to conduct research within the UK, and under these exceptional conditions claimants will still be allowed to claim relief on R&D expenditure incurred outside the UK.
For example, in some instances material factors such as geography, environment, population or other conditions that are not present in the UK but are indispensable to the research, (such as deep ocean conditions or a large sub-population with specific genetic or physical characteristics) may dictate that a research project is carried out overseas.
Similarly, HMRC is willing to accept extenuating circumstances involving regulatory or legal requirements, in relation to aspects such as clinical trials or treatment regimes, which may mean R&D projects will need to take place outside the UK.
On the bright side, materials sourced overseas, and costs related to data and cloud computing sourced overseas can still be claimed for if these are an intrinsic part of R&D carried out in the UK.
Make UK members who have questions relating to R&D tax relief or wish to discuss the implications of recent changes to the R&D tax relief scheme, can contact Sandy Findlay on 07807 739033 or email firstname.lastname@example.org
ABGI is a leading international tax incentive and innovation management advisor. They already help many Make UK members accelerate their innovation activity by identifying and securing appropriate funding in the form of grants, tax incentives or commercial funding.
With 30+ years heritage and 200 experts, ABGI manage £1.6billion of innovation incentives annually across 19 countries, for some of the world's best-known brands.