In today’s fast-paced world, Artificial Intelligence (AI), with models like ChatGPT, is becoming the driving force behind efficiency, data-driven decisions, and personalised experiences in almost every major commercial industry. The UK government’s 2021 National AI strategy paper laid out the government’s aims to invest in AI, support the transition to an AI-enabled economy and ensure the UK gets the national and international governance of AI right. Also named as one of the five critical technologies in the government’s UK Science and Technology Framework 2023, AI, meaning machines that perform tasks normally performed by human intelligence, and which learn to improve at doing so over time, is set to be a huge area of innovation as well as the subject of significant regulation over the next few years.
To date, we’ve seen several major industries actively invest in AI technology. To name a handful of examples, in the field of healthcare, AI is transforming critical care pathways with novel applications in medical imaging analysis, drug discovery, disease prediction, and personalised medicine. In the field of finance, AI is being adopted for fraud detection, algorithmic trading, risk assessment, and customer service automation, and in the field of transportation, companies are developing AI technologies for autonomous vehicles, including self-driving cars, trucks, and drones, which are revolutionising transportation and logistics.
What is the role of R&D Tax Relief for companies seeking to invest in AI?
In order that companies in Britain stay at the forefront of this revolution, government funding and tax incentives such as the R&D tax relief scheme are likely to be pivotal in unlocking the cash resources for companies to take advantage of AI technology within their businesses. R&D tax relief offers financial incentives, including tax credits or deductions, for qualifying R&D expenses.
Moreover, recent changes in legislation mean that for accounting periods starting on or after 1st April 2023, companies will be able to claim for relevant cloud hosting costs and the cost of data licences. Cloud hosting costs and the cost of data licences are paramount for companies investing in AI or Machine Learning due to their direct impact on the scalability, flexibility, and affordability of such projects. Cloud hosting provides the necessary computational resources for AI tasks, allowing companies to adjust resources as needed. Data licensing costs are crucial as quality training data is vital for AI model development.
In addition, the government has also extended the meaning of R&D for tax purposes guidelines to include advances made in the field of pure mathematics. This is likely to assist companies investing in core AI research as AI development often relies heavily on mathematical foundations, such as linear algebra, calculus, and statistics. Recognising pure mathematics as a qualifying activity acknowledges the importance of theoretical research in AI.
RCK Partners is ideally placed to assist businesses investing in AI technology. With an in-house team of software consultants with extensive experience in securing R&D tax relief and identifying eligible R&D activities within high-tech projects, as well an in-house compliance team which independently review and optimise claims for tax compliance, we ensure that companies investing in the development of proprietary software can maximise their financial incentives while keeping their focus on maintaining a competitive edge in the marketplace.
Speak to one of our team today.
PETER LITTLE
R&D MANAGER – SOFTWARE
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