Yep, Brexit is back in the news. We know, we can hardly contain our excitement either.  

With Britain looking set to officially leave the EU at the start of 2021, we can’t deny the major impact this significant political and economical shift will have on British business. But what will it mean for R&D tax credits?

While there’s still so much uncertainty surrounding our withdrawal, the good news is that, thus far, R&D tax credits have remained unaffected. Join us in exploring whether this could be set to change over the next few months, for better or worse, and what this could mean for your business moving forward.

Could R&D tax relief end?

The UK government has expressed no intention to halt or reduce current R&D tax relief schemes following the UK’s withdrawal. 

On the contrary, the government is eager to ensure British markets remain competitive and industry leading, meaning innovation is arguably more important now than ever before.

With this in mind, the government has actually expressed an interest in potentially increasing the national R&D investment to 2.4% GDP, with the intention of creating a more attractive economic landscape to potential investors and entrepreneurs.

Does it depend on the type of deal secured?

To an extent.

Upon the UK’s departure from the EU, we will no longer be subject to EU regulations on factors such as state aid. In theory, this means that companies won’t be prevented from receiving multiple forms of state aid - an SME that previously couldn’t claim R&D tax relief on the basis of already receiving another grant now can.

In principle, this may allow the government to increase the limit on R&D tax relief and other forms of state funding, serving as an economic stimulus package that keeps markets competitive and employment high. 

If only it were that easy.

The EU has made it abundantly clear that they won’t allow the UK to over-subsidise their markets in order to undercut competition. This means that, to an extent, R&D tax relief would still be subject to EU regulation.

The UK government, on the other hand, has proposed an alternative where the UK creates its own regulations based on World Trade Organisation (WTO) subsidy agreements. This proposal has already been rebuffed by EU governing bodies, who refuse to take involvement in any free trade agreement.

The takeaway

While the future of R&D tax credits remains in limbo as UK and EU negotiations continue, the positive takeaway is that Brexit doesn’t look set to affect R&D tax relief in any particularly negative way.

For more information on how we can help your SME navigate its R&D tax relief in these turbulent times, get in touch with LUMO today.