As indicated in the Prime Minister’s speech to the CBI at the beginning of the week today’s Autumn Statement has confirmed a continued commitment to increasing government support for R&D. The Prime Minister also announced a review of the support given to innovative firms through the tax system. The intention being to make the R&D credit more effective, creating a tax system that is profoundly pro innovation.
In the Autumn Statement today the Chancellor has announced some of the detail around the nature of the government R&D spending support. Essentially the support consists of an increase in funding to be distributed by grant giving bodies and commitment to a review of the tax system incentives.
In order to boost UK productivity part of a new National productivity Investment fund (NPIF) will provide an additional £4.7 billion by 2020-21 in R&D funding. This extra £2 billion a year by the end of this Parliament is an increase of around 20% to total government R&D spending. This funding is provided with the aim of enhancing the UK’s position as a world leader in science and innovation and is phased as follows:
|R&D Funding (£M)||425||820||1,500||2,000|
Through the NPIF the funding will be channelled to:
- The Industrial Strategy Challenge Fund – a new cross-disciplinary fund to support collaborations between business and the UK’s science base, which will set identifiable challenges for UK researchers to tackle. The fund will be managed by Innovate UK and research councils. Modelled on the USA’s Defence Advanced Research Projects Agency programme the challenge fund will cover a broad range of technologies, to be decided by an evidence-based process.
- Innovation, applied science and research – additional funding will be allocated to increase research capacity and business innovation, to further support the UK’s world-leading research base and to unlock its full potential. Once established, UKRI will award funding on the basis of national excellence and will include a substantial increase in grant funding through Innovate UK.
Review of R&D tax credits
The Chancellor announced a review of the tax environment for R&D to look at ways to build on the introduction of the ‘above the line’ R&D tax credit to make the UK an even more competitive place to do R&D. There are no further details available at present except that it has been confirmed that this announcement makes no difference to current claims and that further details on the review will be announced in the new year.
We welcome the additional government investment increasing support for R&D. However there will clearly be a time lag before companies are able to access this. In addition the distribution of these funds by Innovate UK and the research councils via a grant process will mean an increased administrative burden on the companies involved in what is currently a resource intensive grant application process. In addition we understand that currently the success of R&D grant applications is typically around 25% and therefore it may be difficult for companies to access this.
Any improvements to the R&D tax credit schemes resulting in increased support for claimant companies is welcomed. Both the SME and RDEC schemes currently give companies the ability to reduce their tax payable or obtain payable tax credits if they are not in a tax paying position. For R&D performing companies this is vital source of additional funding in support of their contribution to the UK economy.
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