This note provides a summary on the recent draft legislation setting out the details of upcoming key changes to the UK’s R&D tax incentive regimes.
The draft legislation will be included in Finance Bill 2023 and will apply to accounting periods beginning on or after 1 April 2023. Under the current legislation for SME and R&D Expenditure Credit, companies can claim relief on R&D activity that is conducted overseas. The new legislation will refocus R&D tax credit reliefs to support innovation in
The draft legislation restricts eligibility for subcontracted work to limit expenditure to where the third party is performing R&D work in the UK, and for externally provided workers (EPWs) where workers are paid through a UK payroll. However, HMRC have introduced an exemption that can be applied when certain conditions are met such that certain activities that cannot realistically be undertaken in the UK should still be eligible.
The restriction does not apply to:
■ software costs,
■ data licences,
■ cloud computing costs,
■ consumables, and
■ payments for clinical trial volunteers overseas.
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