R&D boost helps Scottish innovation role

Steps to boost research and development (R&D) tax relief, which applies to all firms in Britain, sends a “clear message to global businesses that Scotland is open for innovation”, according to KPMG.

The accountant said the “surprise” decision to up the main tax credit to 12 per cent means that, net of corporate tax, the UK government will contribute £10 for every £100 of R&D spend by business.

R&D Expenditure Credit (RDEC) “plays a key role in encouraging global businesses to choose the UK as a location for their R&D,” said Sandra Gilchrist, incentives partner at KPMG in Scotland.

She also said the Budget should “go a long way to raising the profile of R&D incentives available to businesses in Scotland”.

Hammond noted plans to allocate an extra £2.3 billion for investment in R&D, saying “the first strides towards the ambition of our Industrial Strategy to drive up R&D investment across the economy to 2.4 per cent of GDP”.

Gilchrist also called for the Chancellor to address productivity “and ensuring the UK has advanced products and services to allow it to compete in a global market, particularly following Brexit”. She credited Hammond with identifying that the key to addressing such issues is innovation, “so it is great news that he has continued to invest in both R&D grants and credits”.

Gilchrist added: “We now look forward to the imminent Industrial Strategy white paper, which will hopefully help produce a cohesive strategy addressing the entire product life cycle.”

Also looking at the Budget’s R&D measures was Jumpstart. Scott Henderson, MD of the R&D tax relief specialist, said: “The plan to bring UK R&D spending into line with the world’s other rich nations within a decade is just the fillip that businesses need against the backdrop of Brexit uncertainty. The commitment to improve productivity signals that Britain is serious about maintaining its primary role as a trading nation.”

However, he also sounded a note of caution, and said that while he welcomed the higher RDEC rate, “it’s disappointing not to see a similar increase in the relief available to SMES”.

He said 83 per cent of claims in 2015-16 were from SMES, costing the Treasury £1.3bn. And he warned that too much government spending on R&D “could have the counterproductive effect of increasing dependency on the public purse. The ideal situation is to create a business and innovation environment that convinces companies of the commercial virtues of making their own investments in R&D. This budget goes a long way to achieving that goal.”