UK Spring Budget: Government trumpets improved tax relief scheme for ‘R&D-intensive SMEs’

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U.Okay. Chancellor Jeremy Hunt went a small way towards addressing considerations over proposed analysis and growth (R&D) tax credit score cuts for small-and-medium sized enterprises (SMEs). But he stopped wanting the u-turn some had hoped for following the Government’s Autumn Statement last November.

Today’s announcement got here as a part of the U.Okay.’s Spring Budget, the place Hunt revealed various investments into the know-how sector, together with plans for a £1 million annual AI prize, quantum investments, and a brand new £900 million ‘exascale’ pc.


The R&D Tax Credit scheme was first introduced by the U.Okay. Government back in 2000, designed to entice companies to speculate in innovation. Through the scheme, SMEs can qualify for tax aid for R&D expenditure, which could cowl scientific trial prices, supplies, and staffing, whereas loss-making companies can apply for money tax credit.

Under the scheme, corporations are classed as SMEs in the event that they have fewer than 500 staff, and a turnover of lower than €100 million or a stability sheet that falls under €86 million. If they meet that standards, loss-makers can at the moment apply for an R&D declare of 33%, or 33p for each £1 they spend on R&D. With the modifications announced last November, nevertheless, that figure was set to drop to 18.6%, or 18.6p for each £1 spent on in-house R&D — successfully a 40% lower.

The announcement had sparked important criticism from throughout the enterprise and know-how spectrum, with the Coalition for a Digital Economy (COADEC) concluding that the common startup might stand to lose round £100,000 per year. And in reality, the transfer had shocked many, notably given Hunt’s much-trumpeted mantra about making the U.Okay. the following Silicon Valley.

In his funds in the present day, Hunt didn’t do an about flip as such, given that the beforehand announced discount will stay in place — nevertheless, loss-making “R&D-intensive” startups on the market will obtain a top-up. Those that spend 40% or more of their whole outgoings on R&D (which is rather a lot) will be capable of declare a tax credit score of 27%, or £27 for each £100 spent.

“That means an eligible cancer drug company spending £2 million on research and development will receive over £500,000 to help them develop breakthrough treatments,” Hunt said, including that the general package deal quantities to round £1.8 billion.


But nevertheless we have a look at this, all SMEs that beforehand claimed credit for their R&D investments will nonetheless be down ranging from April 1 in comparison with before. In whole, the Government said that some 20,000 startups will benefit from R&D scheme total, however only round 11,000 will qualify for this new top-up portion: 1,000 from the pharmaceutical and life sciences trade; 4,000 from pc programming, consultancy, and “related activities,” similar to AI; and round 6,000 companies from different segments similar to manufacturing.

Mark Smith, accomplice at Ayming, a consultancy that helps companies secure Government R&D funding, says that in the present day’s announcement is a tacit acknowledgement from the Government that its resolution last year to cut tax aid for all SMEs “undermines its ambition to make Britain the next Silicon Valley,” although this newest redress is considerably restricted.


“The Government’s new funding for R&D-intensive businesses will allow the U.K.’s most innovative companies to do what they do best,” Smith said in an announcement issued to TechCrunch. “The structure the Chancellor ran through sounds sensible and clear, with 40 percent of spend being a straightforward figure and goal for others to work to. However, it is a lot more targeted and therefore not as accessible. Forty percent of spend on R&D is very high, so only a very small portion of U.K. businesses will be eligible.”

On prime of that, it’s not completely clear how the brand new laws might be utilized, and to what particular disciplines, even when it has recognized broader industries.

“While its definition of ‘research-intensive SMEs’ is clear, we don’t know which companies and what activity will be eligible,” Smith continued. “It would be great to see green innovation incorporated into this. It was a little disappointing not to hear more mention of funding relating to R&D in environmental technologies, which the U.K. could be a world leader at. To drive forward the sustainable transition, specific tax incentives must be considered around green R&D. If they can include that in definitions, it could provide a boost both to our innovation and net-zero objectives.”

UK Spring Budget: Government trumpets improved tax aid scheme for ‘R&D-intensive SMEs’ by Paul Sawers initially printed on TechCrunch