# R&D Tax: Important Exemptions and Upcoming Changes for the IT & Software Industry Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-02-24 Category: BUSINESS Category URL: https://financedigest.com/category/business Meta Title: New Changes to R&D Tax Relief Scheme in IT Sector Meta Description: Discover the latest updates to R&D tax relief for IT & software companies, including new categories eligible for relief and compliance requirements. URL: https://financedigest.com/rd-tax-important-exemptions-and-upcoming-changes-for-the-it-software-industryhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/istock-1295900106-1736816149553-compressed.jpg) _By **Michael Eghan,** IT Sector Lead, [Ayming](https://go.ayming.com/l/183052/2022-02-24/4cc2pw)_ Following the announcement in the Autumn Budget 2021, some changes were made to the R&D tax relief scheme, including those specific to the IT and software sector. Historically, certain elements prevalent within the sector were not claimable, however it was announced that this will change under the updated scheme, with the following categories brought into scope and qualifying for R&D expenditure relief as of 1 April 2023: - Licence payments for datasets - [Cloud computing](https://www.financedigest.com/the-value-of-cloud-computing.html "The Value of Cloud Computing") costs that can be attributed to computation, data processing and software The government invited these changes in the hope that the [tax relief](https://www.financedigest.com/adding-revenue-through-rd-tax-relief-service-2.html "Adding Revenue through R&D Tax Relief Service") better incentives cutting-edge R&D activities which rely on vast amounts of data that are analysed and processed through cloud technology. ## Sub-contracting and driving innovation towards the UK Many IT & Software companies heavily rely on sub-contractors to conduct their research and development, namely due to the [cost effectiveness it provides to UK businesses](https://www.financedigest.com/cutting-business-costs-pros-of-using-commercial-heat-pumps-in-2016.html "Cutting business costs: Pros of using commercial heat pumps in 2016"). The [autumn budget](https://www.financedigest.com/autumn-budget-predictions.html "Autumn budget predictions") 2021 proposed to limit tax relief for payments to subcontractors and activities that take place in the UK. This new [change by the government is intended to encourage UK companies to employ skilled staff and to conduct research](https://www.financedigest.com/deloitte-research-reveals-inaction-on-climate-change-could-cost-the-worlds-economy-us178-trillion-by-2070.html "Deloitte research reveals inaction on climate change could cost the world’s economy US8 trillion by 2070") and development activities within the UK, which will inevitably improve skills and benefit the UK from a tax perspective. In contrast, where [companies claim for expenditure on externally provided works](https://www.financedigest.com/alone-together-how-to-maintain-a-positive-company-culture-while-working-remotely.html "Alone together: How to maintain a positive company culture while working remotely") (EPWs), these will in future be restricted to EPWs who are employed in the UK and contribute to PAYE/NIC. ## Compliance and ethical R&D claims Compliance and [regulation have become a key focus for HMRC to protect](https://www.financedigest.com/aon-introduces-new-cyber-solution-in-response-to-eu-regulation-on-data-protection.html "Aon introduces new cyber solution in response to EU regulation on data protection") the integrity of the R&D tax relief scheme. The autumn budget also proposed administrative changes that will ensure compliance of future claims, meaning [companies will need to provide more information when processing](https://www.financedigest.com/companies-that-dont-upgrade-their-financial-processes-this-year-will-get-left-behind.html "Companies that don’t upgrade their financial processes this year will get left behind") claims. All claims will be [digitally filed and the intention to claim must](https://www.financedigest.com/makes-successful-seller-digital-agewhy-sales-professionals-must-retain-personal-touch-succeed.html "What makes a successful seller in the digital age?Why sales professionals must retain their personal touch to succeed") be notified by either the company or its appointed advisor. Here are some more of the proposed changes: - Increase in resources for R&D [tax credit](https://www.financedigest.com/eu-us-working-on-deal-to-make-ev-minerals-eligible-for-tax-credits-eu-official.html "EU, US working on deal to make EV minerals eligible for tax credits -EU official") compliance from HMRC, with expansion of staff and a new team focused on ethical and compliance. - All R&D [tax relief claims will in future have to be digital](https://www.financedigest.com/self-employed-taxpayers-and-making-tax-digital.html "Self-employed taxpayers and Making Tax Digital") processed. - Each claim will require endorsement by a [named senior office](https://www.financedigest.com/iris-software-group-names-matt-tuson-as-chief-revenue-officer.html "IRIS Software Group names Matt Tuson as Chief Revenue Officer") of the company or appointed advisor. - Companies will need to inform HMRC, in advance, that they intend to make a claim. - [Future claims will need](https://www.financedigest.com/future-proofing-your-small-business-its-time-to-listen-to-your-customers-needs.html "Future proofing your small business – it’s time to listen to your customer’s needs") to include details of the agent who has advised the company. As we are currently aware, the [digital claim submissions will be put in place](https://www.financedigest.com/the-evolution-of-loyalty-and-its-place-in-the-digital-age.html "THE EVOLUTION OF LOYALTY AND ITS PLACE IN THE DIGITAL AGE") from April 2023, but it is currently unclear when the other compliance requirements will take effect. **This is a Sponsored Feature.** --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---