Asked by: Chi Onwurah (Labour - Newcastle upon Tyne Central)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what representations or feedback he has received from (a) small business community, (b) the science community and (c) the investment community on the changes to R&D tax credit announced in the Autumn Statement 2022.
Answered by Victoria Atkins - Secretary of State for Health and Social Care
The Chancellor set out at the Autumn Statement that the Government will work with industry ahead of Spring Budget to understand whether and how to provide further support for R&D intensive small and medium enterprises (SMEs), while also considering fiscal sustainability.
The Government will continue to engage with industry in the coming months and any further changes will be set out in detail in the usual way at the Budget.
The Government has launched a consultation on R&D Tax Relief Reform which closes on 13th March.
Asked by: Chi Onwurah (Labour - Newcastle upon Tyne Central)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, pursuant to the Answer of 19 December 2022 to Question 110697 on Research: Business, whether his Department has made an estimate of the difference between the additional incentivised research and development that was invested by the (a) the Research and Development Expenditure Credit scheme and (b) small and medium-sized enterprises scheme; and if he will make a statement.
Answered by Victoria Atkins - Secretary of State for Health and Social Care
HM Revenue and Customs (HMRC) has an ongoing evaluation programme that includes recent evaluations of the impact of the two R&D tax reliefs on business spending, which is known as additionality.
The ‘additionality ratio’ of each scheme is a measure of additional R&D expenditure generated for each additional pound of tax foregone.
The latest evaluation of the Research and Development Expenditure Credit (RDEC) scheme estimated an additionality ratio of between 2.4 and 2.7 for regular claimants, indicating that every £1 foregone in tax revenue stimulates between £2.40 and £2.70 of R&D expenditure.
The latest evaluation of the Small and Medium Enterprise (SME) estimated an additionality ratio of the UK SME scheme of 0.75 and 1.28 for ‘deduction claims’, and 0.60 and 1.00 for ‘credit claims’, indicating that every £1 foregone in tax revenue stimulates between £0.6 and £1.28 of R&D expenditure.
Further detail on the additionality ratios for both schemes and the methodology used to calculate these ratios can be found in the following evaluation reports:
RDEC:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/934270/Evaluation_report_-_R_D_RDEC.pdf
SME scheme:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/935191/HMRC_Research_Report_598_R-and-D_tax_relief_for_SMEs.pdf
The Government’s review of the R&D tax reliefs is ongoing and any further measures will be announced in due course.
Asked by: Chi Onwurah (Labour - Newcastle upon Tyne Central)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, pursuant to the Answer of 19 December 2022 to Question 110697 on Research: Business, for what reason the projected additional incentivised research and development for the SME scheme spans from £0.60 to £1.28.
Answered by Victoria Atkins - Secretary of State for Health and Social Care
HM Revenue and Customs (HMRC) has an ongoing evaluation programme that includes recent evaluations of the impact of the two R&D tax reliefs on business spending, which is known as additionality.
The ‘additionality ratio’ of each scheme is a measure of additional R&D expenditure generated for each additional pound of tax foregone.
The latest evaluation of the Research and Development Expenditure Credit (RDEC) scheme estimated an additionality ratio of between 2.4 and 2.7 for regular claimants, indicating that every £1 foregone in tax revenue stimulates between £2.40 and £2.70 of R&D expenditure.
The latest evaluation of the Small and Medium Enterprise (SME) estimated an additionality ratio of the UK SME scheme of 0.75 and 1.28 for ‘deduction claims’, and 0.60 and 1.00 for ‘credit claims’, indicating that every £1 foregone in tax revenue stimulates between £0.6 and £1.28 of R&D expenditure.
Further detail on the additionality ratios for both schemes and the methodology used to calculate these ratios can be found in the following evaluation reports:
RDEC:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/934270/Evaluation_report_-_R_D_RDEC.pdf
SME scheme:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/935191/HMRC_Research_Report_598_R-and-D_tax_relief_for_SMEs.pdf
The Government’s review of the R&D tax reliefs is ongoing and any further measures will be announced in due course.
Asked by: Chi Onwurah (Labour - Newcastle upon Tyne Central)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, pursuant to the Answer of 19 December 2022 to Question 110697 on Research: Business, if he will publish the calculations for his Department's estimation that the total level of research and development-related business investment in the economy will remain unchanged; and whether that estimation is partly based on a projected increase in investment through the RDEC scheme.
Answered by Victoria Atkins - Secretary of State for Health and Social Care
As part of the ongoing R&D tax reliefs review, the Government is reforming the R&D tax reliefs to ensure taxpayer’s money is spent as effectively as possible, to improve the competitiveness of the RDEC scheme, and is a step towards a simplified, single RDEC-like scheme for all.
The Treasury has estimated the changes will also help to support fiscal sustainability by raising revenue and reducing fraud and error, without materially changing the levels of R&D expenditure over the forecast period. The OBR certified the package of measures at the Autumn Statement 2022 had no net material impact on the capital stock forecast.
Asked by: Chi Onwurah (Labour - Newcastle upon Tyne Central)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what data his Department holds on the value of the (a) financial assets and investments managed in the UK and (b) revenue brought in by his Department through taxation on capital in financial year 2021-22; and what proportion of those financial assets and investments were domiciled in the UK in that financial year.
Answered by Victoria Atkins - Secretary of State for Health and Social Care
There is no statutory requirement for asset managers or financial institutions to report to Government on valuations of assets of investments under management in the UK, so the requested information is not held.
Further information of different types of capital assets has been compiled by the Office for Budget Responsibility for their Economic and Fiscal Outlook publication which is available here: https://obr.uk/efo/economic-and-fiscal-outlook-november-2022/
Asked by: Chi Onwurah (Labour - Newcastle upon Tyne Central)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what assessment he has made of the potential merits of reinvesting a proportion of the revenues of the Plastics Packaging Tax into plastics recycling infrastructure.
Answered by James Cartlidge - Minister of State (Ministry of Defence)
The government introduced a Plastic Packaging Tax with the aim of encouraging the use of recycled plastic in plastic packaging and in-turn stimulating increased levels of recycling and collection of plastic waste. As set out at Budget 2018, when the tax was first announced, future revenues raised from the Plastic Packaging Tax and the Packaging Producer Responsibility reforms will enable investment to address single-use plastics, waste and litter.
The above reforms will collectively drive higher rates of recycling and demand for recycled plastics, creating a positive environment for private investment in additional plastics recycling infrastructure.
Asked by: Chi Onwurah (Labour - Newcastle upon Tyne Central)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what assessment he has made of the potential merits of utilising the mass balance approach to measure chemical recyclate.
Answered by James Cartlidge - Minister of State (Ministry of Defence)
Chemical recycling offers a potential complementary route for plastic recycling where mechanical recycling is impractical or uneconomic.
Mass balance is one of several chain of custody models that is used by industries to track materials through a complex value chain and can, in principle, be used to determine recycled content in a product. It is important that mass balance does not allow for overclaiming of the recycled content in plastic.
In general, chain of custody models are used in different industries to track all steps and inputs in a supply chain for a product.
Asked by: Chi Onwurah (Labour - Newcastle upon Tyne Central)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, pursuant to the Answer of 8 November 2022 to Question 74675 on Research: Tax Allowances, whether he plans to increase staff capacity on the R&D Anti Abuse Unit team.
Answered by Victoria Atkins - Secretary of State for Health and Social Care
HMRC is committed to tackling error and fraud within the R&D reliefs including announcing the new Anti Abuse Team being operational from April 2023. As part of our response to the criminal attack in April 2022, HMRC accelerated the formation of the Anti Abuse Team ahead of the April 2023 commitment. But resource is only part of the package of measures.
In Autumn 2021, the Government announced changes to the R&D tax reliefs, including additional information and claims requirements to address abuse and boundary-pushing.
At Autumn Statement 2022 the Chancellor announced that as part of as part of the ongoing R&D tax reliefs review, the Government is reforming the R&D tax reliefs to ensure taxpayer’s money is spent as effectively as possible, improve the competitiveness of the RDEC scheme, and take a step towards a simplified, single RDEC-like scheme for all.
Asked by: Chi Onwurah (Labour - Newcastle upon Tyne Central)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, with reference to the Autumn Statement, CP 751, published on 17 November, what reason the Statement did not use the phrase child poverty and what provisions in the Autumn Statement are designed to reduce child poverty.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
The Government announced decisive action at Autumn Statement to support millions of families with rising energy costs. To protect the most vulnerable in society, the government will also increase benefits in line with inflation (10.1%) from April 2023, benefiting millions of families who receive Child Benefit, Child Tax Credit or Universal Credit. Households on means-tested benefits will also receive an additional £900 Cost of Living Payment in 2023-24. The Government will also provide an additional £1 billion to enable a further twelve-month extension to the Household Support Fund, as well as continued universal support via the Energy Price Guarantee.
The Government has consistently said that the best way to support families’ living standards, and ensure that children grow up in an environment that allows them to fulfil their potential, is through good work, better skills, and higher wages. This is why, at Autumn Statement 2022, the Government announced it will bring forward the nationwide rollout of the In-Work Progression offer, from September 2023. This will mean that over 600,000 Universal Credit (UC) claimants in-work will meet with a dedicated work coach so that they have support to increase their hours or earnings and become financially independent from UC.
In addition, the Government confirmed at Autumn Statement that, from April 2023, the National Living Wage (NLW) will increase by 9.7% to £10.42 an hour for workers aged 23 and over, in line with the government’s ambitious target for the NLW to reach two-thirds of median earnings by 2024. This represents an increase of over £1,600 to the annual earnings of a full-time worker on the NLW and is expected to benefit over 2 million low paid workers.
Asked by: Chi Onwurah (Labour - Newcastle upon Tyne Central)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, pursuant to Answer of 5 December to Question 99832 on Small Businesses: Tax Allowances, whether an impact assessment has been made on the introduction of potential restrictions on overseas spending within R&D tax credits on (a) the total investment of UK companies in R&D and (b) the total investment in R&D by international organisations with headquarters outside the UK.
Answered by Victoria Atkins - Secretary of State for Health and Social Care
As part of the ongoing R&D tax reliefs review, the Government is reforming the rates of the R&D tax reliefs. This reform ensures that taxpayers’ money is spent as effectively as possible, improves the competitiveness of the Research and Development Expenditure Credit (RDEC) scheme, and is a step towards a simplified, single RDEC-like scheme for all.
For expenditure on or after 1 April 2023, the RDEC rate will increase from 13 per cent to 20 per cent, the small and medium-sized enterprises (SME) additional deduction will decrease from 130 per cent to 86 per cent, and the SME credit rate will decrease from 14.5 per cent to 10 per cent.
Statistics relating to the R&D tax reliefs, including the distribution of R&D tax credit claims by industry sector, can be found here: https://www.gov.uk/government/statistics/corporate-tax-research-and-development-tax-credit/research-and-development-tax-credits-statistics-september-2022#industry-sector-analysis.
The SME scheme costs twice as much as RDEC, and its cash value to loss-making firms is three times that of RDEC. Yet HMRC estimate that the RDEC scheme incentivises £2.40 to £2.70 of additional R&D for every £1 of public money spent, whereas the SME scheme incentivises £0.60 to £1.28 of additional R&D.
The UK provides a generous offer of support for R&D investment, and this will continue to increase, with R&D expenditure via tax reliefs estimated to increase from £37.2bn in 2020-21 to around £60bn by the end of the scorecard period, 2027-28, and direct funding for R&D will reach £20bn a year by 2024-25. The reform to the rates is estimated to leave the level of R&D related business investment in the economy unchanged.
Ahead of Budget the Government is working with industry to understand whether further support is necessary for R&D intensive SMEs, without significant change to the overall cost envelope for supporting R&D.
The Government is committed to refocussing the R&D reliefs towards innovation in the UK. At Autumn Budget 2021, the Government set out its intention to more effectively capture the benefits of R&D funded by the reliefs through refocusing support towards innovation in the UK. The Government will allow for some narrow exemptions where it is in some way unavoidable for the R&D activity to undertaken overseas.