R&D changes in the Spring Statement

R&D changes in the Spring Statement

As well as announcing measures aimed at tackling the cost of living crisis, the chancellor used his Spring Statement on 23rd March to unveil changes to research and development (R&D) policy.

Head in the clouds

Sunak’s statement confirmed that “from April 2023, all cloud computing costs associated with R&D, including storage, will qualify for relief.”

The inclusion of “storage” in this category is a welcome addition, but full details will not be confirmed until draft legislation is published.

It’s worth noting that later in the Spring Statement document, the categorical assertion that “all cloud computing costs” will be allowable has been subtly watered down to “the government… intends to include all cloud costs.”

Going global?

The chancellor’s statement reiterates the government’s commitment to “ensuring that the UK more effectively captures the benefits of R&D funded by the reliefs.” In short, its aim is to focus tax relief on economic activity carried out in the UK, as opposed to overseas.

There are two examples given where overseas R&D activity will still quality.

  • Where it is not physically possible to carry on the activity in the UK, e.g. deep ocean research
  • Where regulatory or legal requirements mean that the activity cannot lawfully be carried out in the UK.

These two concessions don’t give much away, and there’s still scope for challenges from companies that have legitimate business structures with overseas entities, which could lead to further revisions.

Levelling up

Changes to the corporation tax rate from 2023 will also have the effect of making RDEC (research and development expenditure credit) claims slightly less valuable, dropping from 10.5p to 9.7p per £1 spent. The government has acknowledged this, and indicated that it will consider changes to address the drop.

Doing the sums

Sunak’s statement says that because there is a growing volume of R&D activities underpinned by mathematical advances, the definition of R&D for tax relief will be expanded to include pure mathematics as a qualifying cost.

This is likely to be of interest to those working in areas such as artificial intelligence, quantum computing and robotics.


Both the Public Accounts Committee and the National Audit Office have made clear that abuse of the R&D tax relief scheme (particularly the SME scheme) is an issue that needs to be tackled.

The Spring Statement offered no further specifics on this, but it did include a commitment to ensuring that the reliefs are effective and deliver the best possible value for taxpayers.

In the spotlight

Although some uncertainties remain, R&D – and to an extent, capital expenditure – remain very much in the spotlight for the government.

Ongoing changes to allowable activity, revisions to the allowable expenditure, and increased scrutiny on R&D tax relief claims mean that expert support is needed now more than ever.