Budget

Accounting industry welcomes Budget’s R&D push

Yesterday (27 October), chancellor Rishi Sunak re-affirmed the government’s commitment, with a target of overall public spending on R&D of 1.1% of GDP by the end of this parliament

The accounting industry has welcomed “promising signals” for continued investment in research and development (R&D) and innovation.

Yesterday (27 October), chancellor Rishi Sunak re-affirmed the government’s commitment to the area, with a target of overall public spending on R&D of 1.1% of GDP by the end of this parliament.

Reforms to R&D tax reliefs available to companies were also announced, with an emphasis on “modernisation, reducing of abuses, and targeting” of reliefs better to effectively capture the benefits of R&D funded by the UK taxpayer.

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Karen Campbell-Williams, head of tax at Grant Thornton UK, explained that cloud computing and data investments are “high priority areas” for investment amongst clients so the reforms to R&D tax relief will be overall helpful. However she notes that whilst many businesses will benefit, some will be “adversely impacted” by the proposed restrictions on international R&D spend, limiting relief to domestic activities.

Matthew Day, tax director at Mazars stated the firm welcomed the government’s intention to set out plans to tackle abuse of, and improve compliance with, the R&D tax reliefs later in the autumn.

He said that the current rules on R&D consultation, which were set out 20 years ago, failed to reflect current technology usage, noting that these changes are now  likely to benefit existing claimants who currently exclude these costs.

However, Tim Croft, national head of R&D at Azets, said that despite welcoming the changes, he firm was still waiting to hear whether R&D spending and tax reliefs will be used in a “meaningful way” to address the government’s levelling up agenda.

Meanwhile, Jenny Tragner, director at the R&D tax credit consultancy ForrestBrown and a member of HMRC’s R&D consultative committee, added that Sunak “clearly” views R&D as essential to economic recovery and growth in the UK.

She commented: “We are pleased to hear that the government will set out its plans to tackle abuse of and improve compliance with R&D tax reliefs later in the autumn.

“At its launch, the consultation was praised as a significant opportunity to modernise the incentive to secure its long term success. Having provided extensive feedback on the consultation, we look forward to reviewing the government’s future plans for the incentive once they are published.”

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