R&D reliefs integral to May's industrial strategy

The government has issued a green paper on future industrial strategy outlining plans to review tax breaks for investment in research and development (R&D), enhance training provision and increase capital investment 

Launching the green paper, PM Theresa May said: ‘Underpinning this strategy is a new approach to government, not just stepping back and leaving business to get on with the job, but stepping up to a new, active role that backs business and ensures more people in all corners of the country share in the benefits of its success.’

There was also recognition that the government needs to create the right environment for investment post-Brexit and will be looking at tax breaks as part of the overall strategy.

To support the industrial strategy, the green paper states that the government plans to ‘substantially increase investment in R&D and ensure that UK research continues to be world class. We will provide an additional £4.7bn of funding by 2020-21 – an increase of around 20% to total government R&D spending, and the biggest increase in any parliament in almost 40 years’.

The £4.7bn investment figure was confirmed at the Autumn Statement last November.  

Pointing to plans to refresh existing R&D tax reliefs, the paper stated: ‘We will also explore how we can best use this additional funding and the tax environment for R&D to drive up the level of private investment in science, research and innovation across the economy… and examine whether there is more the government can do to stimulate private sector investment and make the UK a more competitive place to do R&D.’

The move comes on the back of a review of the tax environment for R&D, which was mentioned in AS 2016.

Attempts to broaden R&D tax reliefs to companies outside of the largest businesses in the UK have been hampered by complex rules and compliance issues, although efforts to simplify the system in 2014 has increased update. The cost of support for the SME scheme rose by £325m to just over £1bn in 2014-15, of a total £2.45bn of R&D support claimed over the 12-month period.

The main beneficiaries of the tax relief are manufacturing, professional, scientific and technical, and information and communications.

The total value of R&D expenditure against which claims were made was £21.8bn in 2014-15, an increase of 31% from the previous year, according to the latest HMRC statistics. 

There will also be more support for Local Enterprise Partnerships with a review of their role in delivering local growth, including extending the support available from the What Works centre for Local Economic Growth.

Local areas will also be fully involved in the plans, with government asking for views on how to strengthen key local institutions, encourage local initiatives and develop leadership at a local level. It will also look at barriers to capital investment, funding limitations and how public sector procurement can support innovation. Access to training will also be a key part of the new industrial strategy.

The 132-page HM Government Building our Industrial Strategy green paper, closes for comment on 17 April 2017. Details of how to respond to the proposals are available on p8 and on the dedicated consultation portal

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