Member Article

Budget impact on UK technology and innovation

Brian Williamson, MD at Jumpstart comments on the impact of yesterday’s Budget for UK technology and innovation.

Yesterday, George Osborne unveiled his 2015 budget, and there were good news for innovative businesses with the Chancellor announcing a number of improvements to R&D tax credits, measures clearly designed to encourage UK business to innovate and in turn, fuel economic growth.

The two main measures are:

1 - Increase in the above the line credit from 10% to 11%, and also increase in the rate of the SME scheme from 225% to 230%. (No surprises there, as these measures were previously announced in the Autumn Statement 2014). Also, qualifying expenditure will be restricted for R&D tax credits so that materials incorporated in products that are sold are not eligible. (from April 2015)

2 – Introduction of voluntary advanced assurances lasting 3 years for smaller businesses making a 1st claim to improve the access to R&D tax credits for smaller companies (from autumn 2015) and reduce the time taken to process a claim (from 2016)

What we can do, however, is now fully calculate the impact of the previously announced (Budget 2014) improvements in the R&D tax credit programme.

Without factoring in the 30% increase in SME uptake from last year, the SME cost to the Exchequer is likely to be around £13m, which is modest to say the least. However should the programme uptake increase again by the same amount year-on-year, SMEs will be drawing down an extra £130m, which is substantial.

The utilisation of the Large Company scheme was static and in fact reversed slightly in the last year, however the introduction of Above the Line credits could increase the large company drawdown by a massive £350m. This is notwithstanding the expected increase that will come from large loss-making companies now being incentivised to claim. It is much more difficult to put a number on this.

So the companies who will be celebrating will be the larger companies for sure, and to a lesser extent the SMEs which will have retained their benefits and had them slightly increased. The one obvious hole left in this piece of legislation is how to reward innovative SMEs with large retained losses.

At the moment this type of SME finds it difficult, in most cases, to get a much-needed cash injection. So post-election the question will be for either George or Ed who has the surname (Balls) to change it?

This was posted in Bdaily's Members' News section by Jumpstart Ltd .