by Pronovotech Pronovotech No Comments

Government launches new R&D consultation

The government has just launched a review of the R&D tax relief schemes with the headline driver being to ‘raise total investment in research and development to 2.4% of UK GDP by 2027’ (previously the target associated with the scheme was 1.7%).

The process has begun with the issue of a consultation document, with the deadline date for responses of June 2nd 2021.

The implication is that the government is aiming to step up its support for R&D, but wants to do so in ways that improve both the impact and the cost-effectiveness of providing that support. The government also wants to ‘ensure that the reliefs remain up-to-date, competitive and well-targeted’.

A Broader Scope

In recent years, there have been changes to the scheme, including steady improvements in the benefits available and measures to reduce fraud. Recent targeted consultations have addressed the questions of specific areas of technology, for example, bringing cloud computing costs and the costs of data required to support R&D into the scope of the reliefs.

However, the new consultation is aiming to look at the entire picture by exploring ‘the nature of private-sector R&D investment in the UK, how that is supported or otherwise influenced by the R&D relief schemes, and where changes may be appropriate’.

The consultation is even soliciting views on long-established aspects of the R&D tax scheme, including the definition(s) of R&D, the eligibility criteria and the scope of the reliefs.

The wording of the consultation even discusses ‘targeting of the reliefs’ which opens up the question of:

  • whether some kinds of R&D deliver better outputs per pound of support or are more valuable to the economy than others; and
  • whether certain industries should be considered more ‘worthy’ of support?

Dealing With Regional Inequality

The consultation is also seeking views on whether the R&D tax scheme has a role in driving a greater spread – geographically and across more organisations – of valuable R&D activity.

It points out that ‘R&D expenditure is concentrated in a relatively small number of large companies. Geographically, claims tend to be concentrated in firms with a registered office in London, the South East or the East of England’.

R&D Advisors and Fee Structures

Question 6 of the consultation invites participants to relay their experiences of agents’ expertise and specialist knowledge and, of course, fee structures.

This comes back to the ‘value for money’ point we always make; a fair fee for the work done is of course right and proper, but the R&D tax scheme is in place to reward the companies doing the R&D in order to stimulate the UK economy, not to channel money to advisors.

Our Initial Response

We would encourage all companies undertaking R&D and claiming (or intending to claim) benefits under the scheme to respond to the consultation, even in part.

At 17 questions, it’s not too onerous an exercise and offers the opportunity to provide inputs on practically every aspect of the scheme. The consultation document can be found here.

Pronovotech will be responding and will, as usual, post our response in due course.