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GovGrant urges boost for productivity and innovation in the October Budget

GovGrant, the innovation and R&D tax specialist, has urged the Chancellor to use the tax system to boost the UK’s army of inventors and innovators in the Budget on 29 October.

CEO Luke Hamm said that tax credits for R&D (research and development) and innovation freed up investment to boost productivity and growth, and was essential if the UK is to be a global business destination post-Brexit.

He said: “Every £1 awarded to innovative businesses via R&D tax credits stimulates between £1.53 and £2.35 in additional R&D expenditure. The government spends 0.6% of the total tax take on R&D tax credits, and delivers £8.1bn of R&D spend as a result. That is a massive return on investment.”

Luke said the latest figures published by HMRC showed that while more companies were claiming tax credits for R&D and innovation, the rate of growth is slowing, and there was a 11% drop in the number of claims under the patent box incentive.

“We’d like to see Mr Hammond widen the tax credits scheme to include new sectors like social sciences that are related to scientific and technological advancement. We also want more help for small companies, for example where they are scaling up but the management opts not to draw market salaries. At present the government doesn’t allow for that: 20 people may be working very hard to build their SME and opt for a £10K salary, but they don’t get credit for it.”

Luke also urged the Chancellor to increase the value of the benefit for small companies and increase the enhancement rate from 130% – 150%. “A business should always benefit if it is undertaking R&D, regardless of tax position. If the relief only preserves losses, companies tend not to make a claim,” he said.

Turning to the Patent Box (a scheme where companies can claim tax credit for new inventions and intellectual property (IP). Luke said IP should always be classed as an intangible asset on a business’ balance sheet.

“The government must deliver more active support for businesses that are granted patents by the IPO, especially by providing the resources to defend UK patents against raids from foreign competitors, including litigation funding.

Luke said he welcomed reports that the Chancellor is planning to introduce policies that boost the UK’s productivity, via increases in the tax-free allowance for capital investment to encourage building factories and upgrading machinery, but stressed equal support was needed for intangibles, such as R&D and innovation, “because encouraging both creates a virtuous circle of innovation investment in tangible and intangible assets.”

“Support by the Chancellor for the UK’s innovative businesses will send the clearest signal yet that the government is serious about its industrial strategy,” said Luke, who added that the target of investing 2.7% of GDP in innovation by 2027 is not enough. “Achieving that target is laudable, but only gets the UK to where Germany is in 2018. Post-Brexit, the economy will need significantly more stimulus if the UK is to live up to it’s ambition to become a global destination of choice for innovative businesses.”

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