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What could the General Election mean for R&D tax?

Author: Tom Mason

The next UK General Election has been called for 4 July 2024, with much emphasis placed on the tax proposals of all parties and the potential for a Budget sooner than expected.

We understand that this is an uncertain time for your clients. R&D tax relief is a major incentive to innovate with support for cash flow, so the potential for a major fiscal shake-up is nerve-wracking.

We’re here to help, with our assessment of the current positions on R&D tax as the 2024 General Election approaches.

The Conservative stance

As the party currently in office, the Conservative Party has overseen a significant transformation of the R&D tax relief scheme in a bid to tackle non-compliance.

The most significant of these changes has been the merging of the R&D Expenditure Credit (RDEC) and SME relief scheme into the R&D tax relief scheme from 1 April 2024.

This has been a period of upheaval for the R&D landscape, but we are now reaching a period of stability.

It is likely that this approach would continue under subsequent Conservative Governments as the merged scheme and additional compliance measures begin to tackle issues such as error and fraudulent claims.

Labour’s position

The R&D tax scheme was introduced in 2000 under a Labour Government.

Since then, the party has affirmed its commitment to supporting businesses and commercial innovation, pledging in a February 2024 statement: “stable R&D tax credits, 10-year R&D budgets and a new Regulatory Innovation Office.”

In practice, this is likely to mean at least a few years of no further changes to the R&D tax relief scheme as businesses seek stability after a year of sweeping changes.

Additionally, the party has previously suggested further direct investment in commercial R&D, as opposed to tax reliefs – although this is likely to be a few years off yet.

What do other parties say?

The two largest parties are not the only ones to take a view on R&D tax relief.

Sarah Olney MP, Business and Treasury Spokesperson for the Liberal Democrats, has previously expressed support for the scheme, backed by a commitment to facilitating innovation and supporting independent businesses.

On the other hand, The Green Party has expressed the need for a more substantial overhaul of the UK’s approach to R&D, criticising the “paucity of properly planned and long-term R&D in low carbon technology” and “industrial R&D focused on securing and exploiting intellectual property”.

It’s likely, then, that a Green Government would further amend the scheme, placing an increased focus on incentivising sustainable R&D over commercial projects.

The verdict?

Across the board, economic policy recognises the importance of supporting innovation and the businesses leading the way forward – particularly for those in high-growth sectors investing in society-wide benefits, such as pharmaceuticals and sustainable energy.

As the tax landscape in the UK evolves, we’ll be here to advise you and your clients on accessing R&D tax relief – helping you to buck the trend and grow your advisory services.

Contact us today to discuss how we can help you help your clients in the R&D tax landscape.