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The Future of R&D: How Labour Plan to Revolutionise Innovation

9 July 2024

R&D Future - How Labour Plan to Revolutionise Innovation- Alexander Clifford

Defining the meaning of Keir Starmer’s “Change” and how the new Labour government may impact your R&D tax credit claims.

Following last week’s general election, the British public voted in favour of The Labour Party, leading to a substantial party majority in the House of Commons. As the party begins their trajectory of change, many business owners are wondering what this will mean for them.

So today we’re going to explore what the Prime Minister’s single-word campaign headline “Change” means for businesses across the UK, taking a special interest in what this governmental shift will mean for their R&D tax credit claims. 

History of Labour and R&D Tax Credits

R&D tax credits were first introduced in 2000 by a Labour government with the intention of increasing innovative research and development in the UK, thus fostering an environment of growth among British businesses. While initially focusing on the growth of SMEs (small and medium-sized businesses), a scheme was later introduced that encouraged large businesses to also invest more in their technological and scientific growth. 

Since then, many parties have endorsed the R&D tax credits scheme, due to the way that it has seen an increase in research and development based productivity – which in turn positively benefits the British economy. But no party has been more supportive of the scheme than its founders, with the Labour party ensuring that they always have a viable plan for R&D tax credits throughout every one of their political campaigns. 

Promises from the 2024 Labour Campaign

As soon as Rishi Sunak stood on the rainy front steps of 10 Downing Street and announced a general election, Labour were ready with a hefty manifesto that outlined their plans for change. Within this manifesto, Labour’s Industrial Strategy made two things clear:

  1. Labour plan to increase the budget assigned to the R&D tax credits scheme
  2. Labour plans to introduce a Regulatory Innovation Office

With the aim to lay out a business tax roadmap within their first six months, Labour has time to define how these changes will come into effect, allowing business owners time to fully prepare for changes in R&D legislation. 

What is the Regulatory Innovation Office?

While they haven’t gone into too much detail about what this new office will be, Keir Starmer’s Labour Party have stated that the Regulatory Innovative Office will exist to aid in improving the accountability of claimants, with the sole aim at protecting the R&D tax credits scheme from fraudulent claims. 

This comes after a series of reports alleging that numerous previously successful claims are being reinvestigated due to errors and fraud that span across many years. One BBC article stated as such:

HMRC is reassessing past research and development (R&D) tax relief claims, after underestimating the level of error and fraud over many years…But business groups say the process is being “mishandled” and is “crippling” small firms.

The premise of the Regulatory Innovation Office is to prevent the need to reassess claims which could potentially jeopardise small businesses should they be ordered to pay back their tax credits. Whether or not this office would have other duties or how it may operate is yet to be determined. 

How to Prepare for R&D Tax Credit Legislation Changes

Given the fact that Labour does not seem intent on rocking the boat too much when it comes to R&D tax credits, it can be assumed that the claiming process will not see any drastic changes. However, with the introduction of a new office that will likely oversee your claim alongside HMRC, it’s clever to take the following steps to stay in-the-know about the latest in R&D tax credit policy:

  • Closely monitor HMRC updates
  • Keep an eye on R&D tax specialists on social media platforms
  • Evaluate budgetary and policy announcements 

By following these steps, you are able to better prepare for the introduction of new policies, and for changes in overall R&D tax credit legislation.

Mapping Business Strategies With Government Priorities

Considering the introduction of the Regulatory Innovation Office and Labour’s intent to broaden scientific and climate based research and development, it’s clear that their priorities are to advance the reach of R&D incentives, while placing an intense emphasis on compliance.

Necessary Records for an R&D Tax Credit Claim

Regardless of the changes that Labour and their new Financial Secretary to the Treasury (Lord Livermore) may implement in order to uphold these priorities, there is one way that businesses can ensure that they are prepared no matter what’s around the corner. This, of course, is keeping meticulous records of everything related to your research and development activities, the most important being as follows:

  • Well documented financial records
  • Detailed project reports
  • Payroll documentation
  • Technical specifications

Not only will these records ensure that you’re prepared for any changes, but they will help to bolster the authenticity of your claim, ultimately maximising your chances of making a successful claim.

Maximising Chances of a Successful R&D Tax Credit Claim

While record keeping will provide businesses with the preparedness necessary to make a claim during a governmental shift, there remains a number of things that can improve the chances of a successful outcome. The following are three things that we recommend for obtaining a successful R&D tax credit claim: 

  1. Begin preparing your claim as early as possible (in accordance with HMRC)
  2. Understand and compile the necessary information pertaining to the claim
  3. Work with an R&D tax credit specialist 

This last point is especially poignant, as HMRC actually recommends that you work with a specialist in order to ensure that your claim is both relevant and compliant every step of the way. Not only that, but an R&D tax credit specialist will take point on an R&D claim, ensuring that businesses are kept informed throughout the process – without feeling overwhelmed with compiling documentation and keeping track of all of the deadlines. 

To summarise, the new Labour government has a huge task on their hands in regards to recovering the British economy. But with their sights set on the R&D tax credits incentive, they are looking to propel innovative research and development onto the global stage. Making the UK the centre of innovative progress. 

To aid in your company’s elevation into the global market, we at Alexander Clifford offer our expertise as R&D tax credit specialists. Our specialists are on hand to manage your case with care and discretion, ensuring that your R&D claim is both compliant and confidential. Begin your claim by entering your details in the contact form below.

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