R&D tax credits have had a good run in recent Budgets and Autumn Statements. Headline rates have become more generous for both large and small companies. However, while there were no shock reversals this time round, with this budget we very much suspect the devil could be in the detail.

The R&D relief rises that were announced in December were confirmed to be going ahead, as were the boosts to the creative industry reliefs. The Voluntary Advanced Assurance scheme for SMEs was fleshed out with a little more detail; advanced assurances will apply to companies making a first time R&D claim from autumn 2015, and will apply for three years. A two year publicity campaign to raise awareness of R&D tax credits will also run alongside – all very positve news.

The changes to the treatment of consumable items, meaning consumable items that are incorporated into products that are sold ineligible for R&D relief, are likely to be felt most heavily by the manufacturing and engineering sectors. While the original proposals were altered slightly, meaning the new restrictions will not apply where the product of the R&D is transferred as waste or where no consideration is received, we still feel the changes are likely to have a considerable impact on companies developing ‘first in class’ products – where large elements of their consumable costs are now no longer likely to be eligible for relief. If you consider a Formula One racing team for example, where almost every element of the vehicle is bespoke in nature, the impact of these changes on the level of R&D relief available to them could easily run into several million pounds annually.

There was more positive news, HMRC have committed to reducing the amount of time taken to process R&D claims from 2016 onwards, while for most claimants the efficiency of the approval process already comes as a pleasant surprise, but anything to speed up the process further should be welcomed.

Two cutting edge areas were given a boost. The government will invest £100 million in the automotive industry to support research into driverless cars. This has been a hot topic recently with Britain at the forefront of their development.

And then there is the Internet of Things. The Chancellor’s point with this disruptive technology may be amplified or overshadowed by his ‘two kitchens’ jibe at Ed Miliband. But he did touch upon the importance of high speed broadband and announce £600 million to clear spectrum bands for mobile networks. We are sure both driverless cars and the Internet of Things will be big areas of R&D over the coming years.

What else was there for industries with intensive R&D?

Energy – both new and old – got mentions. £60 million has been pledged to a New Energy Research Accelerator in the Midlands, while negotiations are opening for a huge Tidal Lagoon project in Swansea Bay. And as for fossil fuels – which have come under added pressure with the collapse in the oil price – a £1.3 billion pound support package was announced to protect the North Sea Oil industry and the wider economy.

And finally, changes were announced to EIS and VCTs to ensure they comply with European State Aid rules, and FinTech received a plug with particular attention being paid to digital currencies.

So while this budget was a little underwhelming for us from an R&D perspective. Good work has been done in recent years to support the UK’s most innovative companies, but ForrestBrown’s view is that there is still much to do. This Budget has not taken that next step required, and this close to a General Election few expected it to. The changes to the treatment of consumables certainly seem like a step backwards to us, but the publicity campaign and other changes should be welcomed.  So, we now have to wait until after the election and see what the future holds.  One thing is for sure, technology is the future so innovation is here to stay.