Consultation announced on data and cloud computing expenditure qualifying for R&D tax credits.
Research & Development tax credits
This objective will be supported by increasing the Research & Development Expenditure Credit (RDEC) rate from 12% to 13% from 1 April 2020.
The government will also consult on whether expenditure on data and cloud computing should qualify for R&D tax credits. This would be a welcome relief for many businesses that are either planning to or already incurring significant costs in improving their IT infrastructure to provide a more secure and flexible working environment for employees, especially in view of the threat posed by Covid-19.
We encourage our members to ensure that they participate in this consultation to maximise the impact for a favourable policy.
Preventing abuse of the R&D relief for small and medium-sized enterprises:
It was announced in Budget 2018 that a PAYE cap on the payable tax credit in the SME R&D schemes would be introduced for qualifying loss-making businesses. The maximum R&D relief in an accounting period would be capped to three times the company’s total PAYE and NICs liability for that year.
This change was originally intended to be implemented from April 2020 but has been delayed until 1 April 2021 following consultation. It is welcome news to businesses that the government has listened to industry and will also consult on changes to the cap’s design, to ensure it targets abusive behaviour as intended while ensuring that eligible businesses are able to access the relief.