Draft guidance: Research and Development (R&D) tax reliefs: new contracting out rules and overseas restrictions
Read the full outcome
Detail of outcome
HMRC published draft guidance on 9 February 2024 ahead of the implementation of reforms to the research and development (R&D) tax reliefs. This included new draft guidance on contracted out R&D activities and updated draft guidance on the overseas rules.
The government is grateful for the 20 responses received. Those responding included individuals, industry groups, businesses, accountants, agents and accountancy professional bodies. The responses included comments on drafting, requests for additional examples and clarification on specific points. There was also praise for the clarity of the guidance in places.
By taking into account the feedback received from stakeholders in response to the draft guidance, we were able to integrate changes that have enhanced the overall quality of the guidance.
HMRC will incorporate the guidance into the聽Corporate Intangibles Research and Development Manual聽in due course.
Original consultation
Consultation description
At Spring Budget 2021, the government announced a review of the Research and Development (R&D) tax reliefs. The objectives were to ensure that the UK remained a competitive location for cutting edge research, that the聽R&D聽reliefs continued to be fit for purpose, and that taxpayer money was effectively used. The government concluded the review at Autumn Statement 2023 with the announcement 聽of the聽R&D聽merged scheme.
At Autumn Budget 2021, the Chancellor announced reforms to support modern research methods. They included expanding the聽R&D聽reliefs to cover 聽data and cloud costs, refocusing support towards innovation in the UK, and changes to target abuse and improve compliance.聽HMRC聽published聽draft guidance聽on the implementation of these reforms in December 2022. The government is grateful for the 63 responses received. Respondents included individuals, industry groups, businesses, accountants, agents and accountancy professional bodies.
At Spring Budget 2023, the government announced that the measures to refocus聽R&D聽relief on innovation in the UK will come into effect from 1 April 2024 instead of 1 April 2023. This allowed the government to consider the interaction between this and the design of a potential merged聽R&D聽relief.
At Autumn Statement 2023, the government confirmed the introduction of the merged聽R&D聽expenditure credit and changes to the way contracted out聽R&D聽activities will be treated from 1 April 2024. The government confirmed that the overseas rules will apply from 1 April 2024 too. Legislation on the new merged聽R&D聽expenditure credit and the enhanced support for聽R&D聽intensive lossmaking Small and Medium Enterprises is included in the Finance Bill.
Today, ahead of the implementation of the reforms to the聽R&D聽tax reliefs,聽HMRC聽is publishing for consultation:
- new draft guidance on contracted out聽R&D聽activities
- updated draft guidance on the overseas rules
The guidance on the overseas rules takes account of comments received in response to the聽December 2022 draft.
It also reflects changes in the legislation, particularly that the term 鈥淨ualifying Overseas Expenditure鈥� is no longer used.
You can share your thoughts and suggestions about the draft guidance by 1 March 2024 by emailing聽[email protected].
Documents
Updates to this page
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Published a summary of the outcome of the consultation, and an updated version of the draft guidance as a result of consultation feedback and responses.
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First published.