HM Treasury’s R&D reliefs report covers its proposals to: 

• expand the definition of qualifying expenditure to include data and cloud costs;
• refocus support towards innovation in the UK; and
• target abuse and improve compliance.

The Tax Faculty’s response to the report, published as ICAEW REP 9/22, stressed that ICAEW and its members were keen to support HMRC in raising compliance within the R&D regime, and identifying incorrect claims and poor practices in the sector. However, there was concern that the measures proposed could impose more costs and burdens on compliant taxpayers. 

The requirement to notify R&D claims in advance caused particular apprehension. Members were keen to understand the purpose of this measure. They wanted to know how the information would be used in a timely fashion by HMRC to justify the potential impact, particularly on first-time claimants.

Members supported the principles around incentivising innovation activity within the UK, ahead of overseas projects. This is not an unexpected policy objective, given the current landscape. However, the Tax Faculty is keen to ensure appropriate exceptions are put in place to protect genuine R&D activity that is required to be undertaken overseas.