The CIOT has responded to the government consultation on the extending the scope of qualifying expenditures for R&D tax credits on two specific areas: data and software. The CIOT’s findings include the following:
there needs to be clarity on whether expenditure incurred on buying a dataset qualifies for R&D, where that dataset is used to test something that is under development and which itself qualifies for R&D;
as the extent and complexity of data analytics grows, it may not always be seen as a consumable support activity for many businesses. This may have significant implications for the tax system, and the treatment of data under the R&D regime should be considered carefully;
CIOT members have reported that software licences that are used only for R&D purposes are generally claimed for in full. Other more general software costs are apportioned on a just and reasonable basis based on an assessment of how overall activity in the company splits between R&D activity and non-R&D. This may present an opportunity to clarify existing guidance and provide examples of methods of apportionment;
the CIOT strongly disagrees with limiting or excluding indirect costs from eligibility for relief as many support or indirect costs form a critical part of R&D. These indirect costs, and the availability of R&D tax credits in respect of them, not only factor into the overall investment decision appraisals, but can add genuine value to the direct R&D work undertaken.
The CIOT has responded to the government consultation on the extending the scope of qualifying expenditures for R&D tax credits on two specific areas: data and software. The CIOT’s findings include the following:
there needs to be clarity on whether expenditure incurred on buying a dataset qualifies for R&D, where that dataset is used to test something that is under development and which itself qualifies for R&D;
as the extent and complexity of data analytics grows, it may not always be seen as a consumable support activity for many businesses. This may have significant implications for the tax system, and the treatment of data under the R&D regime should be considered carefully;
CIOT members have reported that software licences that are used only for R&D purposes are generally claimed for in full. Other more general software costs are apportioned on a just and reasonable basis based on an assessment of how overall activity in the company splits between R&D activity and non-R&D. This may present an opportunity to clarify existing guidance and provide examples of methods of apportionment;
the CIOT strongly disagrees with limiting or excluding indirect costs from eligibility for relief as many support or indirect costs form a critical part of R&D. These indirect costs, and the availability of R&D tax credits in respect of them, not only factor into the overall investment decision appraisals, but can add genuine value to the direct R&D work undertaken.
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