In the Queen’s Speech this year reference was made to expanding the scope of qualifying expenditure for R&D tax credits – long overdue considering the significant changes the R&D landscape has seen over the two decades since its initial conception.
R&D credits are recognised as a key driver of UK business investment in R&D and must continue to be ‘fit for purpose’ if the government is to meet its commitment of 2.4% of GDP.
In this modern economy, the expansion of the R&D tax credit, to include the consumption, generation, processing and analysing of datasets should be a no-brainer. Start- up tech companies developing new products and services utilising machine learning and Artificial Intelligence can often do so only by investing large sums of money in what are generally very expensive data sets. The industry trend towards cloud computing allows companies to work with large data sets and train new algorithms without the outlay of traditional IT infrastructure. However, moving to cloud-based services and infrastructure can include technological risk. An organisation may be more willing to take such risks if assisted financially.
One size doesn’t fit all
Currently the R&D tax credit scheme is focused on the traditional ‘novel’ aspect of innovation which does not now accurately reflect the current practices of many tech firms in the UK. Much of the tech sector’s work is in the ‘Development’ aspect of R&D – creating new inventions usually based on iterative improvements to applications or software which eventually lead to a significant advance in the use of that technology or new use cases.
This fresh outlook on R&D will require the government to reconsider the definitions it uses to categorise R&D and make changes to some of its incentives which are based on these definitions.
MSC R&D – playing our part.
MSC R&D are playing an active role in contributing to the ongoing discussions on the scope of R&D tax credits going forward, putting our membership of key organisations such as the CBI and techUK to good use.
We are able to do this because of our deep understanding of the tech sector, combined with our detailed knowledge of the R&D tax credit scheme – our expert consultant is Gavin Bate, who wrote the manual while at HMRC.
Working with hundreds of innovative clients, many of whom are applying AI to make advances in numerous vertical sectors, we are one of only a few companies who can adequately represent the needs of the tech sector.
This experience and expertise is reflected in the quality of the work we do.
If you are concerned your advisor doesn’t really understand the business you are in – why not talk to us on 0114 230 8401
