From April 2023, businesses will only be able to claim R&D tax credits on research and development work done in the UK*. As UK software developers often outsource part of their R&D to teams in countries like Poland and Romania, they are likely to see their R&D tax credits fall dramatically. This in turn will disincentivise R&D investment by the sector as there is limited capacity to do that R&D work in the UK.
Kevin Edwards, Tax Partner in our London office, comments: “Lots of innovative UK tech and fintech companies will see their tax bills jump as they are locked out of claiming R&D tax credits for work done outside the UK.”
“There is a shortage of IT developers in the UK, which is why so much R&D work has to be outsourced to other countries where the skills are readily available. It is unrealistic to suggest we can create a skills base in the UK in the short-term, especially as free movement of labour from the EU has stopped.”