R&D represents a major market opportunity for the UK. The top 1,000 R&D intensive businesses in the world spent over $781bn on R&D in 2017 alone and in 2019, expenditure on research and development (R&D) performed by UK businesses grew by £822 million to £25.9 billion1 , an increase of more than a third (37.3%) in the last decade.
Understanding the drivers for businesses’ R&D investments is fundamental to recognising the importance of R&D tax reliefs. R&D tax reliefs sit within a wider ecosystem of incentives and considerations that affect business’ decision-making including the UK’s extensive regulatory system, access to skills, labour laws, robust IP frameworks etc. The Government has sent important signals to business with both an increase to R&D tax credits from 12 to 13% (announced at the Budget in March 2020) and this open consultation to consider the R&D tax reliefs system.
A critical outcome from this consultation is ensuring the tax credit system continues to incentivise and attract R&D investment and continues to modernise and keeps pace with advances in research and development approaches. It also remains important that these measures are effective across the board from start-ups to large corporations and forms part of a wider portfolio of incentives addressing the wider tax and fiscal R&D system.