On 1st March 2017 the Government unveiled its UK Digital Strategy, which sets out its vision to keep the UK at the forefront of the digital revolution post-Brexit.
The strategy includes plans to create five international technology hubs and offer digital skills to millions of individuals, charities and businesses by 2020 in a bid to make Britain the best place for digital businesses to invest and grow.
R&D investment is an area that’s been highlighted in the strategy as a mechanism for stimulating growth however, Justin Arnesen, Director of R&D Tax & Grants, reveals why it’s a pull factor that’s lacking any pull right now:
“While it’s encouraging to see that the Government has identified R&D as one of the key drivers to incentivise businesses to become more innovative, the current R&D tax incentives are unfortunately still far from perfect.
“Yes, the Government says it wants to reward IT and technology businesses for going above and beyond the industry standards and consistently pushing the boundaries of what’s currently possible, but in truth, it’s not what’s happening right now.
“On the ground, it’s a totally different story. A large portion of the R&D tax claims we’ve recently seen coming through from IT sector companies are being met with scrutiny and resistance from HMRC. In our experience, one in five R&D tax claims in this sector is currently being put into enquiry or at risk of rejection when, historically, IT-related innovation claims have, rightly, been approved without issue.
“With Brexit looming, now’s the time for the Government to really encourage IT and technology businesses to invest in the UK and really get behind its Digital Strategy. But this can only happen if the pull factors are implemented properly and there’s support across all Government constituencies to make them work.
“As the UK Digital Strategy has only just been released, there’s understandably significant work for the Government and other bodies to do to turn the vision into reality. I very much hope that this involves recognising the current disconnect between how the Government would like IT sector businesses to view R&D and the reality of what’s currently happening within HMRC when it comes to R&D tax claims for this industry. Ideally, processes should be as consistent, transparent and as straightforward as possible, and R&D tax claims is no exception.”
ABOUT THE AUTHOR
Justin Arnesen is Director for R&D Tax & Grants at Ayming. He has been enabling businesses of all shapes and sizes to claim R&D tax incentives since 2008, having worked in South Africa, New Zealand, Australia, and the UK. His professional experience has also included roles at both KPMG and Deloitte.