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Cut R&D tax credits for small businesses.

 


Jeremy Hunt is set to overhaul Britain’s «flagship industrial policy» after warnings that billions of pounds of research tax credits for small companies offer poor value for money and are open to fraud. While the tax credits have significantly enhanced R&D (research and developments) by larger companies, the system’s use by SMEs has had a much more chequered record, with high-profile cases of abuse.

They said Hunt was expected to cut the SME R&D scheme, banking some of the savings and to shift some money to areas that deliver better value. The move will face criticism from business groups. It said that R&D tax credits had been a «huge part of the success story», adding that the «attempt to pull the rug out from small business innovation seemed to us a misreading of scant data points». Onward, a centre-right think-tank, agreed in a report this month that reform was needed but that «R&D tax incentives have successfully raised business R&D to meet our national target for R&D spending eight years early».

But the Cambridge report found that self-funded business investment in R&D was between 10 and 15 per cent lower than before the tax credits were introduced in 2000. Moreover, HM Revenue & Customs evaluations found that the relief aimed at SMEs offered relatively poor value for money, even though it now costs more than the tax credits provided to more prominent companies. Sunak signalled while chancellor that he planned to reform the R&D tax credit system but, at the time, was seeking both to improve and expand it, given concerns that business investment was sharply lower than that of EU rivals.

www.sba.tax

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  1. Anonymous15 November 2022 at 10:40

    Cutting money from R&D is a big mistake. Yes, there are problems but this is not the way to fix them. It fixes nothing and decreases the trust in Government. Now more than ever, we need R&D and we need businesses to feel the Government is there for them.

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