Research and development (R&D) tax relief is not usually centre stage when the chancellor delivers a Budget but Rishi Sunak took everyone by surprise last month. While he added to the country’s R&D spending commitments he pulled the rug out from underneath businesses when it came to overseas costs qualifying for tax credits. They will no longer be eligible from April 2023.
On the face of it this change is well-meaning. It will encourage businesses to perform their R&D in the UK and not overseas creating a virtuous circle of increased spending investment and job creation. However this will heavily affect thousands of businesses that perform R&D overseas including plenty of small and medium sized enterprises.
This is also a fundamental shift because companies subject to corporation tax have been able to claim on overseas expenditure ever since the scheme was created in 2000....
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