UK budget sees R&D tax credits rise
pharmafile | December 3, 2014 | News story | Sales and Marketing | Budget, Cameron, George Osborne, NHS, Whitehead, life sciences
Chancellor George Osborne has delivered the government’s 2014 Autumn Statement to the Commons which includes news of an increase in tax credits for R&D.
Reiterating the recent £2 billion yearly funding for the NHS (raised from foreign exchange fines) Osborne also highlighted that £1.2 billion will be spent on GP services.
Today’s announcement sees research and development tax credits increased for small and medium companies to 230%, and for large firms to 11% – while small business rate relief is doubled for another year.
Greeting the news was ABPI chief executive Stephen Whitehead, who says: “I welcome the chancellor’s decision to increase the rate of R&D tax credits for both smaller and larger firms which will have a beneficial impact on business investment in the UK.
“The pharmaceutical industry is a key contributor to the UK economy and a leading manufacturing sector. Our industry employs 73,000 people directly in the UK and invests £11.5 million per day on R&D.”
Whitehead adds that the ABPI are concerned however, that proposed changes to the Patent Box outlined in a written ministerial statement yesterday may affect ‘incentives for investment in R&D’.
Other reactions
Also supporting the measures is chief executive of Innovate UK, Iain Gray, who says: “This Autumn Statement is huge vote of confidence in Innovative business up and down the country.
“[It] helps innovative businesses bottom lines by increasing the tax credits for R&D and looking to make the process easier for small firms, so they can concentrate on what they went into business for, rather than worrying about the tax man.”
Grey highlights further support for the ‘innovation landscape in the UK’ arising from the budget: which includes £61m being invested across seven government-backed High Value Manufacturing Catapult centres in equipment and expertise – to help around 2,250 manufacturers create technologies and products.
Also there is an additional £28m for an R&D National Formulation Centre, Gray says, that will specialise in the development of formulated products such as medicines and chemicals.
Not so keen on some aspects of the budget news however is Mark Tighe, the managing director of the R&D tax specialists RD Tax Solutions, who says: “By increasing R&D tax credits, the chancellor recognises that the British spirit of innovation appears to be well and truly alive.
“Yet offering these credits is simply not enough; the government now needs to ensure they’re understood and utilised fully. HMRC figures show that a pitiful 0.6% of potentially eligible firms are taking advantage of this relief.”
Tighe says in addition that the majority of UK companies undertaking R&D are unaware that tax claims are valid for just two tax years retrospectively – otherwise they could be lost forever.
Unimpressed with the Autumn Statement even more was National Health Action Party co-leader Dr Clive Peedell, who says: “We’ve already had an uncosted £7 billion tax-cut bribe from David Cameron. Now George Osborne is trying to fool voters with a pre-election NHS bribe using recycled NHS money and dodgy bankers’ fines. But the public won’t fall for it.
“The Tories have forced £20 billion of cuts onto the NHS and wasted £3 billion on a damaging reorganisation. Given that appalling track record, it couldn’t be more obvious that this is a purely political move from George Osborne. But £2 billion is too little to save the public from an NHS crisis and too late to save the Tories from an election crisis.”
BMA council chair Dr Mark Porter also offers his views, saying: “The NHS must not be used as a political football before the general election, or subjected to another unwanted top-down reorganisation afterwards.
“We need a long-term plan to deal with rising demand rather than short-term promises designed more for winning votes than truly saving the health service. Without this, the future of an NHS which remains true to its founding principles – open to all and free at the point of delivery – will be under threat.”
Outside of life sciences
Aside from the slim pickings headline-wise for life sciences delivered in the budget itself, overall it appeared to be geared towards savers and pensioners.
The 10p tax rate for savers was abandoned and cash and shares Isas will be combined into a single new Isa, with annual tax-free savings limit of £315,000 from July next year.
For pensioners, all tax restrictions on access to pension pots was removed which means pensioners do not have to buy an annuity. The tax on money taken out of a pot will be reduced to 20% from 55 per cent.
As for alcohol and cigarettes, beer duty was cut by 1p and there was a duty freeze on cider – tobacco duty will rise by 2% above inflation however. The planned September fuel duty rise has also been cancelled.
Stamp duty in housing is undergoing a reform so that rates apply only to a part of the property price that falls within a certain ‘band’.
Osborne’s key budget statements on the economy:
• 500,000 new jobs created this year. 85% of new jobs will be full-time
• Unemployment set to drop to 5.4% in 2015
• UK is the fastest growing economy in the G7
• 3% growth forecast in 2014, up from 2.7% predicted in March.
Brett Wells
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