My summary on the changes? More complexity, red tape and scope for claimants to trip up, coupled with greater power for HMRC to remove claims unchallenged. Reduced claims for companies relying on input from around the globe. Some good news in expanded qualifying costs and rectifying some anomalies.
Previously announced changes now legislated marked (P)
Some of the amendments to R&D definitions, notably to add data and cloud computing costs to the qualifying costs list, copy across to the patent box rules.
Others don’t. For example, the move to exclude overseas subcontractor costs from being qualifying costs applies only to R&D and does not carry through to the patent box definitions for the purpose of the R&D nexus fraction.
This adds another level of complexity and record keeping for companies who are claiming R&D reliefs and then patent box reliefs on the developed products / processes. We often see UK companies with overseas subsidiaries providing contracted services. In these scenarios, R&D claims will be lower, but the R&D nexus fraction is also reduced as these overseas connected subcontractor costs, although no longer attracting R&D reliefs, still have a negative impact on the R&D fraction for patent box and therefore still need to be carefully tracked.
To find out what R&D relief your business is eligible for, get in touch with the team.
Choosing the right R&D scheme
Coronavirus support schemes and R&D for SMEs
R&D Tax Reliefs for SMEs: PAYE & NIC Cap