16 March 2005

Chancellor Gordon Brown announced Budget 2005. A summary of the Business R&D measures appears below. This summary was written by HM Treasury.

Business R&D

3.71 Business investment in R&D rose by 2 per cent in real terms in 2003, broadly in line with the economy as a whole, but it will need to rise faster than trend growth if the UK is to catch up with competitors. The Government’s focus has been on working with business to encourage greater investment in R&D and innovation, and to promote closer collaboration between industry and the science base.

3.72 On 15 March 2005, the Treasury and the DTI published an in-depth analysis of UK business R&D and innovation performance……fulfilling the commitment made in the 2004 Pre-Budget Report. The paper will inform the first meeting of the UK Science Forum, as well as the first annual progress report on the ten-year framework, due in Summer 2005.

3.73 Building on the continued success of R&D tax credits, the Inland Revenue has embarked on a programme to ensure greater consistency in the treatment of claims and a better understanding of the credit system amongst tax advisers. In conjunction with the SBS, it has developed new guidance for small companies claiming the R&D tax credit, providing plain-English assistance to claimant companies and a template to help small companies determine their qualifying expenditure. The SBS will pilot the new guidance with small businesses soon after the Budget.

3.74 The Government is continuing to evaluate the impact of the credits and to gather evidence on R&D activity in UK firms. In light of this, it is examining how the R&D tax credit can better support those growing firms with the potential to develop into highly-innovative companies in the future, and how it can help retain and grow current world-leading R&D intensive companies and make the UK an even more attractive location for R&D investment. The Government will consult with business on this issue and will publish a discussion paper in summer 2005.