Research and Development Tax Credits

In February, The House of Lords Science and Technology Committee criticised the government for vagueness regarding its innovation strategy. The Committee claimed the government is failing to make the most of the UK innovation centres (Catapults) — lacking a detailed plan and sufficient funding to reach research and development (R&D) ambitions.

The government has since pledged to learn from the coronavirus pandemic, and from the UK’s Vaccine Taskforce, where the public and private sectors successfully worked together. The government also promised to apply these learnings to the UK’s challenges, counting skills gaps, the decline in business R&D investment, and the need for a pro-enterprise regulatory environment to spur innovation.

This summer, Kwasi Kwarteng, Secretary of State at the Department of Business, Energy and Industrial Strategy, published the Innovation Strategy to help the UK keep up in the “global innovation race”.

While government spending on R&D for 2021–22 is £14.9bn, the Strategy includes a commitment to increasing annual public R&D investment to £22bn. The total public and private R&D investment will increase to 2.4% of GDP by 2027.

The UK faces rapidly increasing competition in the global race to innovate, and Kwarteng vowed that the government wouldn’t rest on its laurels. He cited the ambitious approach of South Korea, Israel, and the United States to learn from to become more focused on working with the private sector — giving businesses the confidence to innovate.

The government outlined seven strategic technologies to prioritise where the UK possesses a competitive edge:

  • advanced materials and manufacturing
  • artificial intelligence (AI), digital and advanced computing (including artificial and virtual reality)
  • bioinformatics and genomics
  • engineering biology
  • electronics, photonics and quantum
  • energy and environment technologies
  • robotics and smart machines.

The Strategy laid out ‘Innovation Missions’ to bring about “urgency and pace”. 

“In recovering from the pandemic, we must build on this country’s innovative foundations to create a robust and agile economy that works for everyone and is fit for future generations”, explained Kwarteng in the white paper’s Forward.

“Investment in innovation will be critical to achieving this and to building a greener, healthier and more prosperous future for the UK. Innovation is central to the world’s largest challenges — from climate change and the ageing society to global pandemics. 

“The UK must be in the vanguard of the response to these challenges. Now we have left the EU, we can move quickly to respond to these challenges, and other global opportunities, to cement the UK’s position as a world leader in science, research, and innovation”.

Small to medium businesses in absolutely any industry can claim R&D tax credits, and what qualifies may surprise you. You can take the first step in putting valuable funds back into your business here.