Research & Development Tax Relief qualifying expenditure update – Data and Cloud Computing Costs

Following the most recent consultation into research and development (R&D) tax incentives earlier this year, the Chancellor announced several changes that will be made with effect from 1 April 2023 (a Christmas present many have had on their list for a while!).

One of the major updates being made to Research and Development Expenditure Credit (RDEC) and Small and Medium Enterprises (SME) relief schemes centres on the modernisation of what is classed as qualifying expenditure. A consistent point raised through previous HMRC consultations focuses on data and cloud computing costs, as these costs were previously not classified as qualifying expenditure. Therefore, any funds spent on these activities over the course of an R&D project could not be claimed through either scheme.

In many cases of cutting-edge R&D being carried out it is absolutely vital to have large datasets and analytical methods to analyse said data (I doubt even Santa will be going through his list of data by eye now). Furthermore, cloud computing has continued its rise to prominence even faster than expected due to the necessity of remote working methods throughout the Covid-19 pandemic. Below are the key areas of change.

Dataset Licence Payments

As datasets can be as important to R&D as the classic raw material it is refreshing to see that detailed guidance has already been provided in determining what specific dataset costs will be qualifying.

  • Expenditure spent on datasets via licenses which are used directly for R&D in a qualifying R&D project will qualify for relief. Where an access agreement covers multiple datasets, of which, some are used for non-R&D purposes the claimant will be required to apportion the costs.
  • However, company’s will not be able to claim relief on the cost of datasets that can be either resold or have a lasting value to the business beyond the scope of the project. Specifically, costs relating to a licence agreement which grants the following will not qualify;
    • Any rights of resale over the data.
    • The claimant the right to publish, share or otherwise communicate the raw data within the dataset to a third party.
    • Any ongoing rights of use, beyond the expected term of the R&D project being undertaken by the claimant.

Staffing Costs for The Creation of Datasets

Where companies need to conduct their own fieldwork to develop a dataset, they are already able to claim relief for the relevant staffing costs. If the data is not collected for sale or other commercial purposes and directly contributes to the advance in science or technology being sought by the project. Some examples of these qualifying costs can contain collecting, cleansing, and analysing data. The government intends to publish fresh guidance to make this position clearer.

Cloud Computing Costs

A further area, which as of April 2023 will be classed as qualifying expenditure will be cloud computing services and packages used directly for R&D. One point to note regarding the inclusion of these costs as qualifying expenditure is that the government intends to apply the current principle that applies to general overheads such as rental costs. HMRC will therefore likely intend to exclude similar costs incurred as part of a cloud computing package. Draft legislation is due to be published for this in Summer 2022.

If you need assistance with your R&D relief claim please don’t hesitate to talk to our specialist team for advice – contact us at

How COVID-19 reliefs impact Research & Development Tax claims

The Chiene + Tait team has been inundated with queries regarding the various new COVID-19 reliefs that are available for businesses. Whilst cash has always been ‘king’ for businesses, there has never been a more important time to have sufficient reserves.

Research & Development (R&D) Tax Relief has been the ‘go-to’ cash relief for innovative companies since 2002. There are complexities as to how R&D Tax is interlinked with the new COVID-19 reliefs, which should be considered before diving into making claims for the various reliefs available. Below are a few frequently asked questions we have received from clients in relation to the reliefs:

Should I claim under the Coronavirus Business Interruption Loan Scheme (CBILS)?

Yes, but watch out for traps. EU regulations require that no project, as opposed to no company, can receive more than one notified State Aid. As the SME R&D Tax scheme and the CBILS have both been notified as State Aids, there could be an issue regarding allocation of costs, particularly if the CBILS relates specifically to R&D expenditure, rather than being used more generally to support the company as it is intended. It is vital to watch out for this when drafting CBILS applications. If it is not an option split out the costs, all isn’t lost. An R&D claim would still be able to be made under the RDEC scheme, albeit at a lower level of relief.

Should I use a COVID-specific grant to fund my R&D project?

Since the start of the pandemic, we have seen a significant increase in the number of grants available for R&D projects. In some instances, these grants are deemed to be notified State Aid, meaning that the full R&D project would be ineligible under the SME scheme. A claim can, thereafter, only be made under the less-beneficial RDEC scheme. It is worth noting that, once a project is ineligible for the SME scheme, that’s it. The project would continue to be ineligible for the entire length of the project. It’s therefore important not to just think about the cash benefit this year, but also years 2 and 3.

Where a grant isn’t notified, it will likely be de minimis. Receiving de-minimis aid will still impact your R&D claim but not to the same extent as if you received notified State Aid. All costs subsidised would be ineligible under the SME scheme, however, an SME claim can still be made for the costs not covered by the grant. This essentially means that 2 claims can be made, one under the SME scheme for the non-subsidised costs, while a RDEC claim can be made for the subsidised costs.

It’s not always obvious how a grant should be treated, and it is an area where the devil is very much in the detail. Make sure that you seek advice so that you don’t accidently limit the cash relief available.

What happens if I furlough staff?

When an employee is furloughed, they will not be carrying out any work; therefore, they will not be directly and actively engaged in R&D activities. This will likely impact next year’s claim rather than any immediate claim for obvious reasons, however, it is something to consider. This will not affect your ability to claim eligible projects, once the employee has returned, the R&D project can re-start.

During the pandemic, it is vital that you claim for all relief that you are eligible for. If you have a query about what your business can claim contact our team today at

R&D Tax credits and Grants – how to maximise relief

Grants are an essential tool for growing a business, but did you know that by receiving a grant, it could restrict your company’s ability to claim further Research & Development (R&D) tax reliefs and incentives? In this article, Dave Philp Chiene + Tait’s Head of Research & Development Tax outlines the implications of receiving a grant and its impact on eligibility to receive R&D Tax Relief. Background reading on R&D Tax Relief, and its associated schemes (the SME and RDEC schemes) can be found in a previous article by Dave here.

There is a myth that, if a company receives a grant, it cannot claim R&D Tax relief. Whilst this is untrue, receiving a grant can throw a spanner in the works.

In a bid to guarantee a level playing field for European businesses, the European Commission restricts one Notified State Aid per project. That means if the company has already received Notified State Aid for a project, that project will not qualify under the R&D SME scheme. Any projects that have been in receipt of Notified State Aid will instead fall into the less beneficial RDEC scheme, where companies can claim 10p to the pound, rather than 33p.

Unfortunately, it is not possible to repay the Notified State Aid. Once received, the project is automatically excluded from claiming R&D tax relief under the SME scheme for the entire length of the project.

There are, however, some things that you can do to avoid any potential pitfalls. By following the tips below, it is possible to maximise your claim by combining both grants and R&D tax relief:

Know what type of grant you are applying for – firstly, not all grants are classed as Notified State Aid. As such, not all grants will qualify you for the less advantageous RDEC scheme. De-Minimis Aid, which offers up to €200,000 worth of funding, is not classed as Notified State Aid and will therefore not force the project into the RDEC scheme. In this instance, it is possible to split relief over the two schemes: subsidised expenditure will fall under the RDEC scheme, whilst the remaining unfunded expenditure will remain qualifying under the SME scheme.

Determine what project the grant relates to – the rules apply on a project-by-project basis, not on the total R&D work undertaken in the year. If you have received Notified State Aid in relation to one project, this does not affect your ability to claim under the SME scheme for any remaining projects. Likewise, if you have received Notified State Aid in relation to non-R&D activities, this will not affect your SME claim.

Look at the long-term implications – remember, once you have received Notified State Aid in relation to a project, that’s it: there is no way back. Try to consider the long-term implication of receiving the grant and how it will affect future claims. Taking a small £10,000 grant at the early stages of a R&D project may help cashflow in the short-term, however this could also affect the ability to claim R&D tax relief in future years.

Speak to people who know R&D tax relief – R&D tax relief is an ever-changing, complex area of legislation and it really does pay to speak to an expert to ensure that you are maximising your claim, whilst also planning ahead to avoid any potential pitfalls.  A quick chat at the beginning of a project can provide you with a clear and proactive action plan, leaving you with more time to run your business!

If you have any queries about R&D tax relief, Notified State Aid or De-Minimis State Aid related to investment, contact Dave Philp today at