Finance · 22 November 2017

Autumn Budget 2017: R&D tax relief climbs to 12 per cent, but small firms left out

R&D tax relief
Many believe too much focus is placed on industries such as AI when discussion turns to R&D
Chancellor Philip Hammond used his speech to indicate his belief that by continuing to invest in Britain’s infrastructure, skills and R&D, we will ensure the recovery in productivity growth that is the key to delivering our vision of a stronger, fairer, more balanced economy.

Based on new forecasts provided by the Treasury, total support for R&D (research and development) will increase by a third by 2021-22.

the increase in R&Dtax relief is welcome, but is aimed at large companies who are entitled to Research and Development Expenditure Credit (RDEC) relief. So far no announcement on changes on the R&D regime for SMEs, which arguably need more help than large companies, said Genevieve Moore, partner and head of corporate tax at Blick Rothenberg.

Matt Watts, head of R&D at professional services firm Smith & Williamson, said limiting the increase to R&D tax credits for the large company scheme sends a mixed message to British businesses.

He added: “The R&D tax credits is a popular relief which is promoting investment and creating jobs. Why should only big business benefit when it’s our smaller businesses we need to be supporting

In an official statement, the government said it would, alongside a new pilot to expedite R&D tax relief claims, launch a campaign to increase awareness of the eligibility for R&D tax credits among SMEs workingwith businesses that develop and use key emerging technologies to ensure that there are no barriers to them claiming R&D tax credits.

Jenny Tragner, director at R&D tax credit consultancy ForrestBrown and member of HMRC’s R&D consultative committee, said: “Given that Phillip Hammond said the 5.5m small businesses are arguably the businesses creating his ‘technological revolution’, we would suggest that, as a minimum, the SME R&D tax credit rate needs to be increased (to 137 per cent) just to maintain its current level of generosity.”

Stephen Dyson, head of industry 4.0 at Proto Labs, welcomed the R&D tax relief change, saying Britain’s industrial, engineering and manufacturing industries will be bolstered? by this investment.

this additional financing will also provide welcome support for businesses trying to encourage more young people to pursue careers within manufacturing, he added.

Alongside the commitment, the government unveiled a new Advanced Clearance Service for R&D expenditure credit claims an effort to take some of the strain off of HMRC.

In July, HMRC hired 800 extra staff so it could speed up the help provided through helplines bringing it back to 2013-14 staffing levels. In 2015, a report from Citizens Advice found people were spending an average of 47 minutes waiting to have their call answered when contacting HMRC.

This is all part of a wider 155m investment in additional resources and new technology for HMRC. This investment, the government has stated, is forecast to help bring in 2.3bn of additional tax revenues.

Mark Tighe, CEO of R&D tax firm Catex, was complimentary of the Autumn Statement announcement, but he did havecomplaints about the language used.



Hunter Ruthven was previously editor of Business Advice. He was also the editor of Real Business, the UK's most-read website for entrepreneurs and business leaders at the helm of growing SMEs.

HR & Employment