UK behind the R&D curve

Earlier this year the ONS announced the UK’s spend on R&D had fallen and that we are now worryingly behind our EU competitors.

In a bid to combat this, successive governments have attempted to lift R&D spending through a system of generous tax reliefs. Under the R&D Tax Credits scheme small and medium-sized businesses can claim 225% tax relief on their research costs, and large companies can claim 130%. And a wide range of activity is eligible: from modifying a piece of software, refining a car part or testing a new production process. From IT companies to oil rigs, insurers to car manufacturers, they cover nearly every sector.

Why hasn’t this considerable benefit raised R&D spending levels?

Although it is very difficult to know precisely how many businesses are eligible for the scheme, research has shown that the number is thought to exceed 146,000. This means that only 9% of all the eligible businesses are taking advantage of the scheme. SMEs report an average cash injection of over £40,000 every year through the scheme so that’s a cool £4.7bn every year, ripe for the taking, not being spent on innovation…and innovation is key to reviving economies.

£40k makes an immediate difference to most SME’s, and armed with the knowledge that this is a repeatable incentive year on year (which will of course increase if R&D activity increases) reduces risk aversion, increases funds and enables the intake of more skills.

If you’d like to know more about the scheme, drop an email to team@ruffena.com.

By Roderick Beer, roderick.beer@ruffena.com