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Amidst a global backdrop that is so often characterised by instability, it is heartening to see the UK able to form research deals with an ever-growing number of countries.
Now, a new deal has been struck with Japan and it is worth understanding how this might set the tone for future R&D tax relief claims.
What R&D does the UK-Japan deal focus on?
Unlike some agreements that have a very specific or narrow focus, the UK-Japan deal is of interest to many innovative businesses and the accountants who support them.
This is due to the deal incorporating R&D objectives in life sciences, quantum and connectivity technology.
In particular, the life sciences aspect of the agreement is concerned with seeking new ways of treating previously incurable diseases.
The recent work done to combat metachromatic leukodystrophy has been heralded as a template for future innovation.
While some innovative companies are set to benefit from direct investment, other businesses working in the sector may also benefit from the influx of money and resources that such deals bring.
This may be especially true for those working to develop quantum and connectivity technology, where one advance often opens the door for more advances to be achieved.
For accountants who are looking to support the work that is being done in the wake of this deal, it is vital to understand the ways in which R&D tax relief claims could further supplement the work done.
What role will R&D tax relief claims play in the UK-Japan deal?
Whenever there is a sign that innovation is set to increase, it should also be a notice that more R&D tax relief claims will be needed.
R&D tax relief claims are a way for innovative businesses to get rewarded for advances far sooner than they would be if they needed to rely solely on the commercial success of the advance.
However, international agreements raise the spectre of overseas work and this needs to be contextualised within an R&D tax relief claim.
It is no longer possible to claim for any work conducted overseas unless that work was only possible in the place where it was done.
This means that where an innovative UK business may be collaborating with a Japanese business, it will not generally be possible to include the costs of work done in Japan.
As with the UK-Germany agreement, the push for innovation on an international scale is welcome, but the question of the practicality of forbidding overseas costs remains.
While it is a way of ensuring that innovative companies focus resources in the UK rather than finding cheaper options abroad, it does make these agreements trickier to manage.
For the time being, the focus will remain on UK businesses using the agreements to better enhance the work they do domestically, even if the funding comes from overseas.
Given that we are likely to see more international companies working in the UK for R&D, we have covered the considerations around them in another recent article.
To help innovative companies make the most of new agreements, speak to our team today.
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