Autumn Budget 2021: Eligibility of data and cloud computing costs for R&D tax relief

The Autumn budget brought a number of changes to the R&D tax relief legislation. One of these was a rare change to what costs are eligible for the relief.

Over the years, R&D legislation has become more outdated, failing to keep up with the ever-changing technological landscape, particularly when it comes to software development companies. HMRC has continued to update their guidance but there comes a point where guidance is not enough and changes to statute are required. As cloud technologies have advanced, the current legislation has not kept up with rate of innovation in the R&D process. As such, certain costs have been deemed ineligible even when vital to the technological advancement.

Autumn Budget 2021 Changes

In this Budget, the Chancellor announced that changes will finally be coming to the eligibility of data and cloud computing costs for R&D Tax Relief. This news comes following a consultation period where the government took feedback from a number stakeholders. The responses to this consultation period overwhelmingly supported amending the legislation to allow for data and cloud computing costs to be claimed for R&D Tax Relief.

Additionally, many other global jurisdictions that operate a similar R&D Tax Relief scheme already allow for data and cloud computing costs. The UK Government has accepted that data and cloud computing are key components of modern R&D and is keen for the UK to remain a competitive location for cutting edge research.

Application and Impact

Due to be statutory in April 2023, it is expected that these changes will help drive reinvestment by the eligible companies, helping to grow the economy and advance technology. These changes will see companies being able to claim for costs that have never previously been eligible; for some companies these costs could be substantial.

With all legislative changes, it is expected that this announcement will be followed by a raft of complex requirements and rules that must be followed in order for the costs to be eligible. As such, it is as important that a tax advisor is engaged to help you identify any potentially qualifying R&D costs.

Contact our team today at mail@chiene.co.uk to discuss how this change in legislation may impact your future R&D Tax Relief claim.