HM Treasury Spring Statement 2022
In a Spring Statement which promised to be like no other, the Chancellor, Rishi Sunak, didn’t disappoint. Against an unprecedented backdrop of war in Europe, spiralling fuel costs and prices which have been rising at their fastest rate since the 1990s, the Chancellor reinforced his credentials as a tax cutter, raising the National Insurance threshold by £3,000 to £12,570 and announcing a cut in the basic rate of income tax from 20% to 19% by the end of this parliament. He also published a ‘Tax Plan’ - setting out more detail over the next two years.
And what of the rumoured focus on R&D tax credits?
Although the Chancellor made only a brief reference to R&D, it’s clear that the Government are frustrated at the level of business investment in R&D in the UK – which (as a % of GPD) is less than half of the OECD average. Despite the UK spending more on tax reliefs than almost every other country, the chancellor is clear that “something is not working”.
So, he announced continued reform of R&D tax credits so that they are effective and better value for money. He confirmed the expansion of the reliefs to include all data and cloud computing but has also included all mathematics. This will be a real boost to sectors such as artificial intelligence, quantum computing and robotics.
He has provided clarification on relief only being available to subcontracted R&D activity carried out in the UK. The government now recognises that there are cases where it is necessary to undertake R&D outside of the UK and so will legislate so vital R&D undertaken by businesses based in the UK can continue to qualify for tax reliefs where there is a material or regulatory requirement for this work to be carried out overseas.
He is also considering whether to make the RDEC scheme more generous – rebalancing it with the SME scheme and making RDEC more internationally competitive.
Addressing abuse of the R&D tax relief scheme (particularly in the SME scheme) clearly remains a focus for the Government (having already announced the creation of a cross-cutting HMRC team focused on tackling abuse back in November).
What we think about the Spring Statement
ABGI welcomes these announcements which expand the scope of the schemes to further incentivise innovation. We particularly welcome the ongoing focus on tackling the abuse of R&D tax reliefs to ensure they are effective and deliver the best possible value for taxpayers and will continue to work with HMRC on future reform.
Take a look at our guides to previous announcements here: https://www.abgi-uk.com/hmrc-changes-to-rd-tax-schemes/
Why not try our free R&D Tax Calculator to find out how much you could be claiming back?
This article was written by Jonathan Kennedy, Innovation Funding Consultant.
23 March 2022.