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R&D tax relief: Changes are coming


Reforms to R&D tax relief will allow deductions for datasets and cloud computing, focus the relief in the UK, and amend the claims process to reduce the incidence of abuse.

5th Jan 2022
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On 30 November 2021 HMRC released the policy paper R&D Tax Reliefs Report, which contains several interesting proposals.

Tax reliefs report

The proposals in the R&D Tax Reliefs Report follow announcements in the Budget to: 

  • extend qualifying expenditure to include data and cloud costs;
  • direct support towards innovation undertaken in the UK; and
  • target abuse and improve compliance


The cost of licence payments to acquire datasets for use directly in a qualifying R&D activity will be an eligible cost. These datasets must not be capable of resale by the company, nor can they have any lasting value or use beyond the R&D activity. Essentially, the dataset needs to be akin to a consumable item used in the R&D process.

There will also be restrictions preventing the cost of datasets qualifying where there is a right to sell or further distribute the dataset.

Cloud computing and software

The costs of cloud computing services that are directly used for R&D activities will become an eligible cost. This is expected to encompass costs that can be attributed to computation, data processing and software in respect of R&D activities.

It is intended that the rules will exclude costs in this category to the extent that they are attributable to overheads relating to servers and data storage.

I suspect that these two new categories of eligible expenditure are not going to be as broad as some would like.

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Replies (2)

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By Hugo Fair
05th Jan 2022 12:06

"might we now see a claim format specified in the legislation?"
I hope not, as this would be bound to be followed by new providers of 'template answers' (the exact opposite of the avowed intention of the proposals).

"datasets must not be capable of resale by the company, nor can they have any lasting value or use beyond the R&D activity"
Hmmm ... I suspect those tasked with writing the legislation won't understand the arena well enough to draw the rules tightly. For instance - datasets are the raw 'food source' consumed by many AI developments (such as within medical diagnosis) AND the end result (commercially sold software) will continue to use the knowledge within that dataset even if the data is not being sold-on discretely. Also, at what point does a massive roll-out of beta software (for world trials) cease to be part of R&D and transform into revenue realisation?

When will we realise that policy wonks are dazzled by the Cloud vendors ... so haven't noticed what usually follows on from clouds overhead - being drenched by precipitation of uncertain purity!

Thanks (1)
By Hugo Fair
06th Jan 2022 16:47

Hello, is there anybody out there? (with apologies to Pink Floyd).

The thread 'counter' has been showing .. Replies (3) .. all day; but with only my comment visible (alone and unloved - and it's cold out here)!

Thanks (1)