Although incredibly controversial, the ‘One Big Beautiful Bill’ that is being enacted in the USA radically shifts the way that R&D is conducted in the country.
The generosity of the bill in its rewarding of R&D work will undoubtedly catch the attention of many innovative businesses.
If the UK Government are serious about bolstering the country’s R&D work, it may be time for them to take notes and consider making UK R&D work more rewarding.
How is R&D changing in the USA?
Under the new bill, companies in the USA would be eligible to deduct 100 per cent of their R&D costs from January 2025-2029 in the same year as they are incurred, rather than amortising them over five years as before.
The removal of delays and the sharp increase in the amount of funds that can be recouped stand in contrast to the UK R&D tax relief, where only a portion of qualifying expenditure is available to be recouped.
The move signals at least a mirrored intent to bolster research on both sides of the Atlantic, as the UK and the USA have both now pledged additional support for domestic R&D work.
How might R&D relief in the USA affect UK businesses?
The reason for paying close attention to the changes is due to the impact they may have on the R&D landscape.
While we can be optimistic about the desire of the UK Government to increase R&D tax relief to reflect the changes abroad, there might be some concerns among UK businesses.
If the USA becomes a financially viable place for R&D work to be conducted, then it is likely that more businesses will relocate there.
While we do not predict a mass exodus from the UK, the seismic shift in the handling of R&D in the USA will undoubtedly work in attracting innovative businesses.
The reduced ability to claim R&D tax relief overseas might succeed in keeping some companies locked to conducting their work in the UK, but larger businesses with the ability to operate internationally might transfer the work to where it is most profitable to do it.
As R&D tax consultants, we can help you support your clients in making the most of the R&D tax relief that is available in the UK.
The UK is still a good place for R&D work, but only if innovative companies understand how to maximise their claims while staying fully compliant.
Ultimately, we can all hope that the UK are inspired to continue supporting innovative businesses and propose more generous R&D tax relief schemes in the future.
Help your clients make the most of the opportunities offered by the UK. Speak to our team today!
