ForrestBrown says Government’s new R&D Roadmap doesn’t go far enough to support SMEs

Jennifer Tragner of Forrest Brown

Responding to the government’s recent announcement of a new R&D Roadmap, ForrestBrown, the UK’s largest specialist research and development (R&D) tax credit consultancy, is urging it to make R&D tax incentives more generous in recognition of the vital role SMEs will have to play in the recovery.

The R&D Roadmap aims to attract global talent, cut unnecessary bureaucracy and cement the UK as a world-leading science superpower. The plans, which were unveiled at the start of July, follow the government’s Spring Budget announcement that it would increase R&D investment to £22 billion a year by 2024 to 2025.

The Roadmap will help drive collaboration between government, industry, research organisations and local authorities. It aims to ensure funding is accessible while boosting productivity, improving public services, creating high-quality jobs and delivering economic and societal benefits to communities across the UK.

The Roadmap also includes a focus on increasing investment in ground-breaking research, cutting unnecessary bureaucracy for entrepreneurs and setting ambitious new goals for research to keep the UK ahead in cutting-edge discoveries.

Having examined the plans in detail, Jenny Tragner, director at ForrestBrown and member of HMRC’s R&D consultative committee, says the government’s Roadmap doesn’t go far enough when it comes to taking SMEs on the journey. These businesses form 99 per cent of the UK economy.

Talking about the new plans, Jenny commented: “The UK is facing unprecedented economic conditions caused by the impact of Covid-19, and the timing and intention of the government’s R&D Roadmap is certainly welcome – not least as investing in R&D is key for our future prosperity as a global player in driving innovation.

“However, the Roadmap focuses on the UK’s academic research, but offers little in practical terms for the UK’s vital innovative SMEs. This is a huge missed opportunity.

“For example, the Roadmap recognises the importance of tax incentives for R&D, but offers no plan to review the UK’s current system. More could be done to ensure that our R&D tax incentives really help SMEs. This could be achieved by reviewing the allowable cost categories, such as the current exclusion of rental costs or by accelerating the consultation on hosting and data costs, or considering whether the current tax definition of R&D targets the types of innovative project which will contribute most to the economy.

“In addition, there are wider eligibility rules in the current system which create complexity, such as rules about carrying out R&D for clients or the interaction between R&D tax credits and government grants, and of course there is the headline benefit rates, which have now been unchanged for SMEs for five years. With this in mind, perhaps now is the time for the government’s Innovation Expert Group to review R&D tax credits as part of its remit.

“Finally, the government could also look at what HMRC is doing, or is able to do, when it comes to combating fraudulent R&D tax credit claims – ensuring that businesses are able to access funding without red tape, whilst still targeting potential abuse of the regime.”

Passionate about helping innovative businesses grow and providing growth fuel to the UK economy, ForrestBrown will be consulting SMEs across the UK to encourage the government to revise its Roadmap to include these important factors and ensure that smaller businesses aren’t left behind.