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Many businesses undertaking R&D activities incur considerable costs which are not currently eligible for R&D credits. HM Treasury has recently launched its first consultation in 10 years on eligible R&D costs - recognising that R&D trends - and the types of R&D costs being incurred - are evolving.  

The consultation is inviting views on whether the eligibility of costs relating to data and cloud computing would help ensure that the R&D credit regimes continue to provide ‘excellent targeted support for R&D activities undertaken in the UK’.  These costs have not previously qualified as they do not meet the definition of a consumable item under the current legislation. It has been a decade since the last formal consultation on the scope of qualifying expenditure for R&D, a time when investment in areas such as these were not originally anticipated.

In recent times however, cloud computing has revolutionised the software/tech space offering more accessibility, cost savings, security, flexibility, scalability and strategic edge. And many tech businesses view cloud computing as the key to unlock future innovation and tech capability. Similarly, the importance of data and the use of datasets in R&D projects across a spectrum of industries means data is one of the fundamental components of R&D.  

However, at a time when R&D credits cost the Exchequer over £4.4bn any expansion of the eligible cost categories needs to be carefully considered and in fact the consultation does question whether there are any existing ‘indirect’ or ‘routine’ activities that should be excluded from the regime - potentially to pay for expansion of the eligible cost categories.  Ultimately, the Government will want to ensure that any changes do not add unnecessary complexity to the regimes, offer value for money and importantly meet the policy objective of encouraging increased investment in R&D undertaken in the UK.

To that end, the Government is keen to hear from businesses and business groups to understand: