R&D tax policy: trapped between destinations

Increasing business investment in R&D is a priority for the government. Although R&D tax reliefs remain a well-established method to help achieve this, the current R&D tax incentives require reform. The consultation reviewing R&D tax reliefs is ongoing, but some new measures are planned with effect from April 2023. These include: extending the scope of qualifying expenditure to include expenditure on data and cloud computing; excluding relief for overseas R&D activities carried out by subcontractors and externally provided workers; some administrative reforms to tackle abuse; and some changes to address a number of existing anomalies and unforeseen consequences in the legislation. Meanwhile, HMRC has increased its compliance activity, but questions remain around whether its efforts are being targeted effectively.