Mark Tighe, the CEO of R&D tax relief specialist Catax, said the Chancellor’s announcement dramatically shifts the focus of UK businesses to domestic innovation.
The Chancellor, Rishi Sunak, confirmed the Government will maintain its target to increase R&D investment to £22bn.
Mr Sunak said research and development tax reliefs need to be made “fit for purpose”, telling MPs: “I’m expanding the scope of the reliefs to include cloud computing and data costs.”
He added: “The second problem is this: Companies claimed UK tax relief on £48bn of R&D spending but UK business investment was around half of that, at £26bn.
“We’re subsidising billions of pounds of R&D that isn’t even happening here in the United Kingdom.”
Mr Sunak said from April 2023 the Government will “incentivise greater investment here at home”.
Responding to the announcement, Mr Tighe said: “This could bring short-term turbulence for some businesses, especially larger companies with overseas interests and operations, who may not be able to easily choose where their R&D takes place.
“SMEs (small and medium-sized enterprises) will be much more insulated from these changes than large employers, because they are less likely to be spending significant amounts on R&D overseas.
“These firms will lose out while those companies with more portable investments in R&D will have to move quickly to beat the deadline and on-shore that spending.”