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Budget 2024: key takeaways for UK innovation

Director & Head of Policy
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Image illlustrating highlights from the Budget March 2024

For the first time at a fiscal event since announcing a consultation into R&D tax reliefs in 2021, the Chancellor resisted the urge to make any more changes in this area. This was welcome news for businesses already wrestling with the implications of the merged scheme which comes into force for accounting periods beginning on or after 1 April 2024.

Transitioning to the new R&D tax rules

Businesses will be hoping this heralds a period of stability for the UK’s flagship innovation incentive after the most significant reform since its introduction more than two decades ago. Transitioning to the new R&D tax rules will involve preparing for major changes to the treatment of contracting, overseas R&D and more.

HMRC’s administration of R&D tax reliefs

One way to ease the transition to the new rules would be to ensure that HMRC has the funding and resources available to support businesses with good guidance and effective administration of R&D tax reliefs. HMRC has come in for criticism in recent months for a heavy-handed approach to R&D tax compliance. Despite the Chancellor’s reassuring comments in his speech that HMRC would be given the resources it needs, the detailed documents focus on digital services and debt collection.

Changes to full expensing capital allowances

In other areas of tax, an extension of full expensing to apply to leased assets is welcome. However, it’s worth noting that no commencement date was announced, as well as the fact that full expensing in practice affects a very small proportion of businesses (less than 1 per cent) when account is taken of those for whom the Annual Investment Allowance remains a more beneficial option.

Find out more about ForrestBrown’s capital allowances service.

Grant funding in the pipeline for life sciences

Turning to inward investment, the Government has dedicated £520 million to encourage onshoring and inward investment by pharmaceutical businesses to boost manufacturing resilience in the UK, with application windows open from this summer. The UK is a world leader in life sciences, but the COVID-19 pandemic has exposed major weaknesses within the UK’s manufacturing supply chain and this announcement shows that lessons have been learned.