News | Published January 06 2020

Conservative plans for R and D tax breaks could benefit firms like European Technology Development Ltd

December saw Boris Johnson declare a “new dawn” as the Conservatives secured the biggest majority in Westminster since the 1987 election. As a new decade begins, the UK’s Brexit path is looking clearer but also much emphasis will be on Johnson’s domestic policies, how these may be implemented and what it will mean for Britain’s SMEs.

In the Conservative manifesto, Johnson included a commitment for firms spending innovation to receive further tax breaks on research and development projects, as part of an appeal to make business leaders clear that the Conservatives are backing business.

The exact pledge was to deliver “the fastest-ever increase in domestic public R&D spending, including in basic science research, by upping the research and development tax rate, or how much tax relief businesses are able to claim on research spending, by one per cent, going up to 13 per cent.

Other Conservative plans include raising the employment allowance to £4,000, which will culminate in a tax cut of up to £1,000 for over half a million businesses.

European Technology Development Ltd is a Leatherhead based firm which provides technical consulting to power and processing plants. This consulting is supported by providing state-of-the-art research innovation and consulting, in collaboration with industry and research institutes. It is one example of a company that has already benefited from R&D tax credits, and this policy will, therefore, likely have been welcome news. Now, there will be some expectation as to how it will be implemented.

It will certainly be something that Britain’s SMEs will want to see implemented, particularly so in the midst of some issues that ETD have highlighted, including business rates and an unwillingness from the banks to loan money in support of innovative projects.

Writing in The Parliamentary Review, managing director Dr Ahmed Shibli and Dr David Robertson, technical executive, said: “Research and development tax credits have been of tremendous help, particularly for innovative SMEs like us.

“Managers of high street banks are not always familiar with the benefits that technological innovations can bring about, and are thus often not keen to lend money for something that they do not understand or incorrectly consider to be high risk.

“We believe they should be prepared to take risk with innovation and support small companies in exchange for comparatively monumental returns.”

The Conservative manifesto also promised to review the definition of R&D to cover investment in other areas such as data gathering and processing, and cloud computing, which if implemented will hand a sizeable boost to the technology sector.

Another of Johnson’s promises was to review the business rates system, an issue which Dr Shibli and Dr Robertson believe has hindered the development of UK SMEs.

The men told the Review: “Business rates are another hurdle for the development of UK-based engineering SMEs; they do not relate to the income or profit generated, but, rather, to the size of space occupied.

“Engineering consultancies like ETD may require laboratories with a traditionally disproportionate amount of space, resulting in higher business rates.”

Indeed, how “reducing the overall burden” of business rates will materialise will be a point of huge interest for firms, but for now, business leaders can look forward with optimism. Cautious and tempered optimism, but optimism nonetheless.

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Authored by

Scott Challinor
Business Editor
January 06 2020

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