In the Autumn budget the Chancellor reaffirmed the importance of “backing business” and supporting innovation to aid the recovery post pandemic, and its importance in maximising future economic growth. With the UK being renowned for its research and development (R&D), the Government is striving to increase productivity and economic growth by supporting businesses to develop and realise the potential of new ideas.
Key measures that were announced to support innovative businesses include;
Innovate UK – is a grant issuing organisation, publicly funded, set up to invest in companies that have an innovative new idea. Set up in 2007, the organisation is now 500 staff strong and has invested over £2.5bn into UK businesses. The Chancellor announced that the budget for Innovate UK would double to £1bn per annum. A key consideration is whether the conditions of the grants will be relaxed to allow more businesses to apply. In the last 5yrs C £6.5bn has been sanctioned but with only £2.5bn drawn since its inception.
Scaleup Visas – are a new initiative, launching in Spring 2022, it will allow highly skilled overseas workers easier access to live and work in the UK. Innovative businesses often make the decision to move to areas that house an experienced workforce, not necessarily in the UK. This visa will make it easier for companies to remain in the UK and employ the right people.
Future Fund: Breakthrough – launched in July but reaffirmed in the budget, this fund allows larger companies (those with significant UK operations), looking for investment of £30m and over, to apply for funding alongside a private investor. £375m has been made available with businesses required to have commitments of 70% of an investment round from private investors with a track record of financing innovative companies – such as venture capitalists.
Global Britain Investment Fund – the Chancellor wishes for innovation to take place in the UK but understands that investment from overseas can be critical. £1.4bn has been made available for grants to support inward UK investment; focusing on the life science and automotive industries.
R&D Tax Credits – we are still awaiting finer detail but many companies will benefit from reforms to R&D tax relief, which is being expanded to include expenditure on data and cloud costs from April 2023. Changes are also expected to refocus the support to innovation in the UK and therefore companies incurring costs for R&D activities performed overseas may be negatively impacted. Further details are expected later in the Autumn.
Gemma Thake, a Director in Price Bailey’s Tax team, said of the R&D Tax Credit reforms:
“It is great to see the Government committed to supporting UK businesses to fund innovation. Many companies, from established businesses to technology based start-ups, will benefit from reforms to R&D tax relief which is being expanded to include expenditure on data and cloud costs from April 2023. Although there is expected to be some offset of the tax benefits by limiting relief for R&D activities performed overseas, the changes are overwhelmingly positive and we look forward to further details being set out later this year”.
Parry Jackson, a Director in Price Bailey’s Business team, said of the R&D reliefs:
“A highlight from the budget was the opening up of R&D reliefs which will be extended to include data and cloud accounting costs. Many businesses that benefit from R&D reliefs will already be using data and cloud accounting and as such will generate additional funds that can be reinvested in to their core goals”.
We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.
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