The impact of R&D in the UK’s road to recovery

The impact of R&D in the UK’s road to recovery

What role will R&D have in the Chancellor’s Autumn plans?

Stuart Weekes, Partner, Corporate Tax
The impact of R&D in the UK’s road to recovery
In papers produced by the House of Commons there was an indication that the R&D tax credit schemes would feature in the Summer Economic Update delivered by the Chancellor on Wednesday 8 July. There was certainly a petition by the Institute of Directors to Mr Sunak to widen the scope and make these valuable tax credit schemes available to more companies. However Mr Sunak’s focus on this occasion was to other aspects of the tax system.

As Mr Sunak prepares for an Autumn Budget, this is a perfect time to reflect on the impact of innovation on UK businesses who have needed to address the challenges presented by this unprecedented health crisis. In many cases, walking hand in hand with front line medical specialists, many businesses have been finding creative ways to keep people safe while trying to ensure that business, the economy and society can function.

Innovation within the technology and digital world has also been fundamental to enable businesses and communities to continue and keep connected. On a number of occasions the question has been raised: “how would we have coped with this crisis in a world before mobile phones?”. There is no doubt that the creativity that exists within people would have still allowed us to tackle the challenges presented by the crisis. But this is the fundamental point, it is people’s innovation that allows us to find these solutions, enabling us to ask the question “how can we do this better?”

So as we try new things, and often fail, and turn ideas into innovative solutions, we will see improvements. Innovation is a key tool to help tackle challenges in the economy allowing the UK to tackle the challenges and opportunities presented by Brexit and the COVID crisis.

There will be some pressure on Mr Sunak to raise taxes to generate income to pay for the costs of the COVID crisis. But the Chancellor has an opportunity to be creative and innovative, to boost the R&D tax credit scheme and increase the incentives to companies to encourage more innovation. 

Mr Sunak could review the definition of a qualifying R&D project and ensure that the tax credit schemes reflect the innovation undertaken by modern businesses and the costs they incur. 

He could also increase the benefit of the scheme. While the UK has one of the best schemes in the world, an OECD study showed that there are schemes in other countries that had greater benefits. Mr Sunak should make changes to show innovative businesses that he is serious about them and ensure that the UK’s R&D tax credit schemes are not simply among the best, but are the best schemes in the world.

For more information, please contact Stuart Weekes, or your usual Crowe contact. We also have dedicated R&D and Patent Box pages which can help you to find out more about how your company can access these tax benefits.

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Stuart Weekes
Stuart Weekes
Partner, Corporate Tax
Thames Valley