The general election on 8th June 2017 is fast approaching. Regardless of the result, it will be in the future government’s interest to incentivise UK business as we leave the EU.
The Industrial Strategy Green Paper released in January of this year, highlights the importance placed upon R&D in making the UK competitive.
The UK is currently behind many of its rival EU member states in its R&D expenditure, being only 1.7% of GDP compared to the EU average of 2%. The same measure places the UK behind France, Germany, Austria, Denmark, Sweden and Finland.
Greg Clarke, Secretary of State for Business, Energy and Industrial Strategy recognised that the UK is excellent at research but falls behind in converting this to new business opportunities. One of the tools available to the government to improve this is the provision of tax incentives for businesses.
The call for a snap general election will prompt renewed focus on the UK’s competitiveness and the prospective government’s plans to improve this, building on the Industrial Strategy Green Paper. These will range from directly supporting businesses and R&D to tax plans and as expected tax is already one of the election’s hot topics.
The election has also meant that elements of the anticipated Finance Bill have been dropped to get it through parliament before the election. Provisions for Making Tax Digital for Businesses was one of these victims. Its arrival into legislation has been stalled and the roll out may also be pushed back accordingly.
Previous plans set out under then Chancellor George Osborne for reducing corporation tax and other incentives for businesses may also change depending on the result of the election.
The future government may have a different response to Brexit in the coming years. If corporation tax remained at 19% or even increased, rewarding innovative businesses through the R&D scheme will become even more important to stay on track with the Industry Strategy Green Paper.
The previous Budget gave a brief comment on the R&D tax relief scheme: it was internationally competitive, effective and needed more advertising, but that the RDEC scheme for Large Enterprises (LEs) could be improved to make it easier for businesses. Indeed, the R&D Consultative Committee has been discussing this simplification.
The political parties have not yet published manifestoes, but we would expect to see a focus on boosting UK R&D and businesses in response to Brexit.
Whether they then pledge to go further than the previous plans will remain to be seen.
Specifically, we would like to see commitments to increase the rate of relief for both the SME and RDEC schemes to incentive and support UK innovative businesses.
We're pleased to see that Greg Clarke has announced the Industrial Strategy Challenge Fund, committing over £1 billion over the next 4 years, which can only increase research and innovation in the UK.
If you're interested in finding out whether your business is eligible for Research and Development Tax Credit book a free consultation.