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Good News in HMRC R&D Tax Credits Report, But New Policies Needed to Boost Growth

By Luke Hamm, CEO of GovGrant

The good news is that the number of claims by UK SME businesses accessing the tax credits system has increased by 22% between 2015-16 and the end of 2017. 77% of all claims are from SMEs, and there’s been a welcome 15% increase in the number of first time SME applications.

The initial forecast of the 2018 stats continues to paint an improving picture, but now is the time to push harder. The Irish budget specifically identified R&D tax credits as a way of protecting the Irish economy from the uncertainty of Brexit and made a bold move to increase support in its budget for 2020.

the government must develop policy to put rocket fuel in the process, rather than make incremental changes.

The milestone of £5bn in claims since the scheme began is now within reach, but the government must develop policy to put rocket fuel in the process, rather than make incremental changes. We urge the government to:

  • Increase the enhancement rate from 130-150% to really help businesses benefit from R&D 
  • More help for owner-managed businesses who don’t take a salary but are dedicating their lives to innovation through better R&D tax breaks  
  • Support SMEs who work as a subcontractor for larger companies by allowing them to claim under the SME scheme
  • Improving the scheme to bridge the gap between R&D and Intellectual Property. Inventive companies need government help to commercialise their inventions.

These new initiatives will maintain the significant growth in small claims below £5K in benefit, which hit 9,000 in 2017.

We are way behind our major competitors when it comes to government expenditure on R&D support, at 1.7% of GDP, well short of the government’s 2.7% target. Sweden, Austria, Denmark and Germany already invest above 3.0% of GDP in R&D.

The evidence that the UK economy benefits from tax is plain to see from this latest report, and we urge the Chancellor to take note and introduce in extra help for our most innovative businesses, large and small.

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