Corporation Tax

Qualifying expenditure for R&D tax relief

Produced by Tolley
  • 14 Apr 2022 11:41

The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Qualifying expenditure for R&D tax relief
  • Qualifying and expenditure for R&D tax relief
  • Qualifying conditions for R&D tax relief
  • Qualifying types of expenditure for R&D tax relief
  • Proposed changes from April 2023 ― refocussing R&D reliefs towards innovation in the UK
  • Staff costs
  • Staff furloughed during the coronavirus pandemic
  • Coronavirus statutory sick pay rebate scheme
  • Software
  • Consumable or transformable items
  • More...

Qualifying expenditure for R&D tax relief

Research & development (R&D) tax relief is only available for expenditure which meets certain conditions and that falls within certain types of qualifying expenditure. The conditions and types of expenditure are similar for both SME R&D relief and large company R&D relief with some exceptions which are detailed below.

See also the Research and development expenditure (B) video, which provides more information on qualifying costs and record keeping requirements, together with some worked examples.

As announced in Autumn Budget 2021, R&D tax reliefs will be reformed by expanding qualifying expenditure to include data and cloud costs. On 30 November 2021, the Government published a report on R&D tax reliefs together with the results of research it commissioned into companies’ behaviours and decision-making processes when preparing claims for R&D tax reliefs. The report also provided further details on the categories of data and cloud commuting costs that will be brought within scope ― which will include licence payments for datasets and cloud computing costs that can be attributed to computation, data processing and software. The changes will be included in Finance Bill 2023 and take effect from April 2023.

Qualifying and expenditure for R&D tax relief

Qualifying conditions for R&D tax relief

Certain conditions have to be met in relation to the expenditure, it must be:

  1. revenue not capital in nature, although capital allowance may be available, see the Business premises renovation allowances guidance note

  2. related to a trade carried on or to be carried on by the

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