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NEWS 16 March 2016

Upcoming Budget 2016

Greater support from Chancellor on R&D scheme could prevent businesses from moving innovation centres offshore.

Reflecting on the upcoming Budget announcement on 16th March 2016, Justin Arnesen, our Director of R&D Tax and Grants, has commented:

“With challenging public finances and a slowing economy, the Government is expected to focus on revenue raising measures to help it deliver its fiscal mandate. Plans to reduce the Corporation Tax rate to just 18% by 2020 – as announced in last year’s Budget – will mean the Government has to find even more sources of revenue to fill this gap. However, as Corporation Tax rates fall, so too will the net R&D tax benefit that many businesses rely on. This will have a negative impact on direct and indirect R&D Government funding and could potentially give businesses less incentive to make an R&D claim. The gap between the benefit profit making companies receive from making R&D claims compared to loss making companies is already narrowing. If the incentives for companies to invest in R&D are less attractive then there’s a great risk that the impact of this investment will be diminished, even though the benefit of the Government incentivising businesses to invest in innovation is clear. Private rates of return for R&D investment are estimated to stand at around 30%. With the referendum on Brexit fast approaching, we would like to see the Chancellor either increase the R&D rates or at least give an assurance that the Government will continue to further invest in the development of UK businesses, to stave off any risk that businesses could move their R&D centres to jurisdictions with more favourable and lucrative R&D tax regimes.”