Research and Development

Following several recent government consultations reforming the R&D Tax Relief schemes, there were murmurings before today’s Autumn Statement that widescale changes may be coming. However, the government has again delayed any serious reform but has opted for measures to improve the efficiency and effectiveness of the schemes. 

It was announced that the government will introduce measures later in the autumn to “tackle abuse” and “improve compliance” of the R&D tax credit schemes – which is hardly surprising given the difficult state of the public finances and the continued difficulties with policing the schemes. 

The Chancellor also noted that, in line with many other countries, the UK R&D tax relief schemes will be refocussed to UK-based R&D activities only which may well remove the ability for UK companies to claim for costs of overseas parties assisting with R&D projects.

Importantly, the categories for qualifying expenditure will be widened to include certain data and cloud computing costs but, as noted in a previous consultation regarding same, we may well see certain other categories of expenditure restricted to balance these improvements. 

The continued government funding support for R&D activities (especially the support for Innovate UK) is certainly welcomed but the government is clearly seeking to ensure that the R&D tax credit regimes are more closely aligned to the actual high-quality R&D activity it is hoping to promote. We expect to see further changes in the coming months. 

Capital Allowances

Significant changes to the capital allowances regimes were not expected in this Autumn Statement after the March announcements on the Super Deduction, First Year Allowance and Freeports but the Chancellor did confirm that the Annual Investment Allowance will remain at the current £1 million rate until 31 March 2023 which will be welcomed by businesses. 

The location of the tax sites within the Humber, Teesside and Thames Freeports were published separately today with maps and guidance available. 

Other measures

The lesser known Creative Tax Reliefs for Museums and Galleries, Theatres and Orchestras have been extended and rates increased on a temporary basis. 

The Museums and Galleries Exhibition Tax Relief scheme has been extended to 31 March 2024 and the rates for the three aforementioned schemes will be temporarily increased from today to 1 April 2023 before being tapered back down. 

Also in the creative relief areas - from 1 April 2022, production companies will be able to switch between claiming film tax relief to high-end TV tax relief during production and so ensuring that relief is not lost should a company decide to change their model during the project. 

These announcements are good news for a sector heavily affected by the pandemic.

Get in touch

If you have any queries on the topics covered above, please contact Mathew Scott, partner, KPMG in Belfast.