Spring Statement: R&D reform looks promising, but businesses must still await the detail

James Tetley, Partner, Head of Innovation Reliefs, RSM UK said: ‘Following a recent flurry of press commentary over the past few weeks highlighting the discrepancies between perceived higher levels of investment by the Government in R&D tax regimes, compared to relatively low levels of investment by businesses, many had been expecting R&D tax incentives to be referenced in the Chancellor’s statement. 

However, no big changes were announced. Although perhaps grandly referenced as ‘R&D tax relief reform’ much of what was said is already known, with the ongoing consultation into R&D reform running for several years now. 

However, there were a few positive statements. The first was the intention to reconsider R&D regimes which incentivise UK spend only, which when announced late last year concerned many. This is due to the significant impact on businesses that currently rely on subcontracting certain elements of their R&D activity overseas, or which rely on talented overseas workers.

RSM UK had urged the Government in recent consultations to reconsider this, and limit what could have a detrimental and far-reaching impact on UK based businesses. Today’s statement suggests the Chancellor has taken this feedback on board, and will look to moderate these reforms, allowing overseas R&D activities where there are:

• Material factors such as geography, environment, population or other conditions that are not present in the UK; or
• Regulatory or other legal requirements that activities must take place outside the UK (e.g. clinical trials).

Other positive steps include a widening of eligible software costs, to include all cloud computing costs (including storage), which for many businesses, is a significant cost previously unable to qualify for relief. 

Whilst we still await the detail on these announcements, these seem like sensible steps towards a revision of the rules. What was even more heartening though was the clear signal from the Government that R&D tax reliefs play a key role in encouraging UK businesses to innovate.’