Research from R&D tax relief consultants ForrestBrown suggests that 50% of UK science and technology businesses expect to relocate at least some of their R&D activity away from the UK as a result of forthcoming changes to the R&D tax relief regime from 1 April 2023.
Among the proposed changes is a refocusing of R&D tax relief on innovation carried out in the UK, by excluding relief for subcontracted work and the cost of externally provided workers where R&D activity is carried out overseas.
As the firm points out in its response to HMRC’s consultation on the draft Finance Bill legislation (that will introduce the R&D changes), while measures to tackle abuse are welcome, restrictions on relief for R&D activity undertaken outside of the UK raise concern. For example, where a company subcontracts R&D activity it would need to confirm that the activity is being undertaken within the UK in order to claim relief. The firm proposes a number of alternatives, including a de minimis threshold to ensure that, where a company carries out a minority of R&D overseas, it is excluded from the restrictions.
The change of policy in the UK could backfire says the firm, with businesses likely to look elsewhere for ‘more favourable policy environments from which to run global R&D activity’.
David Byrne, director at Forrest Brown said: ‘R&D tax incentives are a key factor in decision-making for multinational companies when determining where the locus for projects should be. Putting the UK at the centre of global collaboration has clear spillover benefits for the knowledge economy – even when some activities are carried out overseas because of a scarcity of specialist skills in the short-term. Our research indicates that restricting R&D tax relief in this way could ultimately harm the UK’s ambition to become a science and technology superpower.’
Research from R&D tax relief consultants ForrestBrown suggests that 50% of UK science and technology businesses expect to relocate at least some of their R&D activity away from the UK as a result of forthcoming changes to the R&D tax relief regime from 1 April 2023.
Among the proposed changes is a refocusing of R&D tax relief on innovation carried out in the UK, by excluding relief for subcontracted work and the cost of externally provided workers where R&D activity is carried out overseas.
As the firm points out in its response to HMRC’s consultation on the draft Finance Bill legislation (that will introduce the R&D changes), while measures to tackle abuse are welcome, restrictions on relief for R&D activity undertaken outside of the UK raise concern. For example, where a company subcontracts R&D activity it would need to confirm that the activity is being undertaken within the UK in order to claim relief. The firm proposes a number of alternatives, including a de minimis threshold to ensure that, where a company carries out a minority of R&D overseas, it is excluded from the restrictions.
The change of policy in the UK could backfire says the firm, with businesses likely to look elsewhere for ‘more favourable policy environments from which to run global R&D activity’.
David Byrne, director at Forrest Brown said: ‘R&D tax incentives are a key factor in decision-making for multinational companies when determining where the locus for projects should be. Putting the UK at the centre of global collaboration has clear spillover benefits for the knowledge economy – even when some activities are carried out overseas because of a scarcity of specialist skills in the short-term. Our research indicates that restricting R&D tax relief in this way could ultimately harm the UK’s ambition to become a science and technology superpower.’
