Autumn Budget 2021: Research & Development tax relief to be reformed

It has been announced that R&D tax relief will be reformed from April 2023. 

The government will expand the qualifying expenditure categories to support modern research methods by including data and cloud costs which are currently excluded from the additional relief. This is a welcome change as many innovative businesses have significant costs in this area.

R&D relief will however be restricted to costs incurred in the UK. Currently, R&D relief is available on work contracted out to overseas businesses, such as software developers. From 1 April 2023, these will no longer qualify.

There are no changes to the amount of the R&D relief given. For SMEs, R&D relief provides an enhanced corporation tax deduction of 230% of the actual qualifying expenditure on eligible projects.

We expect to hear further details of these changes in due course. 

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