R&D Tax Credits: The Consultations That Will Benefit the Fintech Industry
The secret to Fintech’s success is continued innovation; continual strategies that not only increase the growth of the individual company but also advances the technology capabilities for the sector as a whole. So it is no surprise that R&D tax credits play a crucial role in supporting companies grow, scale and accelerate projects.
The government has a bold target to raise total investment in research and development to 2.4% of UK GDP by 2027. R&D tax credits have a key part to play in incentivising R&D investment by lowering the costs of innovation.
R&D tax credit qualifying expenditure is limited to pre-determined categories. The Kalifia Review rightly identifies the fact that these categories do not fully represent the Fintech industry, failing to capture large amounts of R&D expenditure relating to mainly data purchases.
R&D tax credits were introduced in 2000; since that time, the economic and business landscape has changed, resulting in companies needing to adapt their research and development activities. The Government are aware of this and as such have released two consultations focusing on R&D tax credit relief:
- The scope of qualifying expenditures for R&D tax credits – requesting responses from stakeholders as it considers whether to include R&D costs for data and cloud computing.
- R&D tax reliefs – exploring the nature of private-sector R&D investment in the UK, how this is supported or otherwise influenced by the R&D relief schemes, and where changes may be appropriate.
The decision on whether data and cloud computing costs will be brought into the scope of qualifying expenditure will be taken alongside the wider review of R&D tax credits which is open until 2nd June 2021.
Matthew Jones, managing director at LimestoneGrey, commented:
‘These consultations are a big step forward. With innovation playing such a key role in the country’s economic bounce back from COVID-19, it is only right and just that they have been released to ensure that R&D tax credits reflects the changing reality of research and development, ensuring it remains globally competitive. Hopefully, the changes imposed following the consultation review will make the relief more relatable to the Fintech industry.’
For more on Limestone Grey and the essential work they are continuing to do to optimise R&D tax credit applications for FinTechs across the country visit their website here.