Last month’s Autumn Statement was overall very positive in terms of understanding the importance of Research and Development (R&D) to the UK economy. The Government has set out a clear intention to continue to support R&D and here we look at what the announcements made might mean in practice.
There were two main strands to R&D support in the Autumn Statement. The first promised an investment of £4.7bn between 2017 and 2021 – an extra £2bn per year for R&D by 2020. This is to set up an Industrial Strategy Challenge Fund, the aim of which is to encourage collaboration between science and technology and business, and to ‘substantially’ increase grant funding. The grant funding will be administered by Innovate UK and, in due course, the newly created UK Research and Innovation body.
The second announcement related to the R&D tax reliefs, with the government announcing a ‘review of the tax environment to look at ways to build on the introduction of the Above The Line tax credit to make the UK an even more competitive place to do R&D’. Whilst this statement is devoid of detail, it does indicate the government’s continued support of R&D tax reliefs . Further information is to be made available in the New Year.
Here at Shorts’ Innovation Taxes Group (ITG) we agree with the comments made by the Chartered Institute of Tax (CIOT) in their response to the announcements and hope that the review will not concentrate solely on the Above The Line tax credit – this regime, which was introduced in 2013, was the more significant change to the R&D tax reliefs since their introduction in 2000, but currently only applies to Large companies (essentially those with more than 500 employees). The statistics for R&D claimed for the most recent available year (2014-15) indicate that the amount of R&D relief claimed is roughly split equally between the Large and SME regimes; it would be a shame if the SME companies were not part of this review.
What might the review entail? It’s obviously difficult to tell but one area highlighted in the CIOT’s response is the possibility of some consideration of the distinction between innovation and commercialisation – reference was made by both the PM and the Chancellor to innovation being undertaken in the UK but commercialisation happening elsewhere. Perhaps relaxing the strict rules which prohibit relief on the production phase would help reverse this?
The impact on the Autumn Statement
Clearly the impact of both these announcements will take some time to filter through to the companies undertaking the R&D. In the meantime, in light of the government’s clear intention to continue to support R&D, we would encourage you to review your company’s activities to ensure you are not missing out on valuable R&D tax relief.
Here at Shorts’ ITG we help hundreds of companies’ access R&D tax reliefs – please do not hesitate to contact us if you have any questions about how this might apply to your company
