In advance of the 2015 emergency budget, tax relief specialists Alma calls on the Government to use emergency budget to increase effectiveness of R&D tax credits.
Estimates show that for every £100m the UK invests in R&D, it would receive £290m in total direct and indirect economic benefits. However, the UK lags in 20th place amongst major economies for R&D investments. Although the Government offers attractive tax benefits to stimulate investment in R&D, specialist cost consultancy Alma today issues its emergency budget wishlist to improve the effectiveness of R&D tax reliefs.
- More HMRC resource for R&D reliefs. A commitment for further investment in HMRC resources and training is essential. Restructuring within HMRC means the risk of claims taking too long to be processed is increasing, which could impact on the availability of working capital for some of Britain’s most innovative companies.
- Clarification over the application of penalties to R&D claims. HMRC can apply penalties for a range of errors. However HMRC appears to have changed its approach and, as a result, the penalty process has become unclear.
- Clarification on inclusion/exclusion of staff expenses in claims. There is still ongoing confusion on HRMC’s position on whether staff expenses can be included in R&D claims. Traditionally this has been claimed but there are indications that this might not be included in future.
- Guidance on what will happen to Annual Investment Allowance rates in future. Being able to understand future allowances enables businesses to plan their R&D strategy in the medium to long term. Businesses often make R&D plans over a number of years so need certainty on the future allowances available to them.
- Greater incentives for SMEs. SMEs are the lifeblood of the UK economy, responsible for employing over 24 million people. It is therefore essential that tax breaks support this important and high growth segment.
- Supporting innovation through grants and funding. There are various grants schemes available at local, national and European level to stimulate investment in R&D. It’s important that these continue or are indeed expanded to support business growth.
- A long term strategy for creating a skilled and qualified work force. Creating a workforce with the skillsets to thrive in the 21st century is vital, especially in R&D and high growth industries. The Government needs a long term plan to a long term challenge. There are many ways to achieve this, including encouraging young people to pursue STEM subjects at school and university.
 Source: Battelle report, 2014 Global R&D Funding Forecast
 Source: OECD report 2013