Chancellor’s R&D tax breaks are ‘no great shakes’
YESTERDAY’S Autumn Statement had some big ticket science and technology announcements for the North West but other measures to support innovation were “more modest”.
That’s the view of Karen Campbell, head of tax in the North West at accountancy group Grant Thornton.
As part of his plan for a “Northern Powerhouse” the Chancellor announced the creation of the The Sir Henry Royce Institute for Advanced Materials Science in Manchester with branches in Leeds, Liverpool and Sheffield.
The North West will also benefit from investment in a £113m Cognitive Computing Research Centre at the Hartree Centre, Daresbury. This has been described as a “major partnership with IBM” which will enable non-computer scientists to gain useful insights from big data.
Ms Campbell said: “The investment in science and technology in the form of a new £235m Sir Henry Royce Institute is worthy of the headlines.
“But other measures to support innovation are rather more modest. The increase in R&D tax reliefs is no great shakes in the light of the continued push to drive innovation – 5% more for small companies, whilst the above the line credit for large firms has gone from 10% to 11%.”
She added: “The nasty surprises include the removal of the ability to claim entrepreneurs’ relief when moving from sole trader or partnership to a limited company. With immediate effect the tax charge has gone from 10% to 28%. The change is part of George Osborne’s anti-avoidance measures, but few in the tax world would have regarded his as aggressive tax planning.”
George Osborne also used the Autumn Statement to crack down on the tax arrangements of multi-nationals, give more cash for companies exporting to emerging economies and propose a sovereign wealth fund for the North to invest income from fracking. But many small businesses will be frustrated that the Chancellor did not go further on business rates, just promising a review at this stage.
Mr Osborne danced through the national debt and deficit figures, which were better than expected, partly due to a new accounting treatment. But fundamentally he has missed his target of eliminating the deficit by the final year of this parliament, mainly due to lower tax revenues.
Ms Campbell said: “The changes to Stamp Duty are historic. It’s the oldest of all UK taxes, and moving to a more sensible system that works in much the same way as income tax means that many buyers will suddenly have some more cash in their pocket. In the short term it should boost consumer spending. We’d expect to see the saving quite quickly priced into housing valuations.”
She added: “The Chancellor talks about the need for UK Plc to export more. Our own research in the Agents of Growth programme has shown that a third of mid-market businesses would be more likely to consider exporting to markets such as China or India if the exploratory costs qualified for an export tax credit. Whilst the £45m package of support for exporters is a step in the right direction it might be considered by some to be a drop in the ocean.”
