Asked by: Chi Onwurah (Labour - Newcastle upon Tyne Central)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what discussions he has had with small business organisations on the impact on start ups and scale ups of the changes to Research and Development tax credits.
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.
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 28 November 2022 to Question 90808 on Research: Tax Allowances, what estimate he has made of the annual financial impact of the lower SME R&D tax relief rate on genuine R&D intensive companies not believed to be submitting abusive or fraudulent claims; and if he will provide a sectoral breakdown.
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.
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 2021 business enterprise research and development statistics published on 22 November 2022 by the Office for National Statistics, what assessment he has made of the reasons for differences in increases in expenditure on R&D by companies of 249 employees or less and companies of 250 or more since 2016.
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.
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 28 November 2022 to Question 90808 on Research: Tax Allowances, on which 2021 R&D figure his Department is basing its forecast.
Answered by Victoria Atkins - Secretary of State for Health and Social Care
The amount of qualifying R&D expenditure used to claim R&D tax relief is estimated to be £38.1 billion for the tax year 2020 to 2021. This was published in HMRC’s Research and Development Tax Credits Statistics: September 2022, Section 5.
https://www.gov.uk/government/statistics/corporate-tax-research-and-development-tax-credit/research-and-development-tax-credits-statistics-september-2022
Asked by: Chi Onwurah (Labour - Newcastle upon Tyne Central)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, if he will make an assessment of the potential impact of the Autumn Statement 2022 on levels of household wealth in the North East.
Answered by Andrew Griffith - Minister of State (Department for Science, Innovation and Technology)
The Distributional Analysis published at Autumn Statement 2022 shows that government decisions made at this fiscal event are progressive: low-income households will receive the largest benefit in cash terms and as a percentage of income, and will on average be net beneficiaries from decisions on tax, welfare and amendments to the Energy Price Guarantee in 2023-24.
The government announced at Autumn Statement an additional £900 Cost of Living Payment in 2023-24, benefitting around 400,000 households in the North East. A further 266,000 households in social rented housing in the North East will benefit from the Social Rent Cap.
In addition, the government will shortly be agreeing an expanded mayoral devolution deal with local authorities in the North East.
Asked by: Chi Onwurah (Labour - Newcastle upon Tyne Central)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, if he will provide guidance to small businesses looking to respond to changes in Small Business Tax Credits without reducing research activity.
Answered by Victoria Atkins - Secretary of State for Health and Social Care
At Autumn Budget 2021 and Tax Administration & Maintenance Day 2021 the Government announced a series of changes to the Research & Development (R&D) tax credits. These included allowing Data and Cloud costs to qualify for relief, introducing restrictions on overseas spend and measures to target abuse and improve compliance.
At Autumn Statement 2022 the Government announced that it would rebalance the rates of the small and medium-sized enterprises (SME) and R&D expenditure credit (RDEC) reliefs to ensure taxpayers’ money is spent as effectively as possible.
HMRC will publish draft guidance on these changes before the end of the year and will invite comments on the guidance. HMRC will also engage with business representative bodies to ensure they are aware of the changes.
The Government will also consult on the design of a single scheme, and ahead of Budget work with industry to understand whether further support is necessary for R&D intensive SMEs, without significant change to the overall cost for supporting R&D.
Asked by: Chi Onwurah (Labour - Newcastle upon Tyne Central)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what financial support his Department has provided to homeowners affected by rising mortgage interest rates in (a) the UK, (b) the North East and (c) Newcastle upon Tyne Central constituency.
Answered by Andrew Griffith - Minister of State (Department for Science, Innovation and Technology)
Around 75% of residential mortgage borrowers are on fixed-rate deals and therefore shielded from interest rate rises in the near term. If mortgage borrowers do fall into financial difficulty, FCA guidance requires firms to provide support through tailored forbearance options. The Government has also taken a number of measures aimed at helping people to avoid repossession, including offering Support for Mortgage Interest (SMI) loans for those in receipt of an income-related benefit. It was announced at Autumn Statement that, from spring 2023, the Government will allow those on Universal Credit to apply for an SMI loan to help with interest repayments after three months, instead of nine. We will also abolish the zero earnings rule to allow claimants to continue receiving support while in work and on Universal Credit. In addition, the Government offers mortgage borrowers protection in the courts through the Pre-Action Protocol, which makes clear that repossession must always be the last resort for lenders.
More broadly, the Government has taken decisive action to support households across the UK through the cost-of-living challenges ahead, whilst remaining fiscally responsible. In addition to the £37 billion of support for the cost of living already announced for 2022-23, the Government has announced further support for next year designed to target the most vulnerable households. This cost-of-living support is worth £26 billion in 2023-24, in addition to benefits uprating, which is worth £11 billion to working age households and people with disabilities. The Government is also continuing to provide support to all households through the Energy Price Guarantee, which will save the average UK household £500 in 2023-24.
Asked by: Chi Onwurah (Labour - Newcastle upon Tyne Central)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, with reference to paragraph 5.52 in the Autumn Statement, CP751, published on 17 November 2022, what assessment his Department has made of the potential impact of decreasing the SME credit rate from 14.5% to 10% on the number of SMEs conducting R&D.
Answered by Victoria Atkins - Secretary of State for Health and Social Care
The reform announced at Autumn Statement will ensure taxpayer’s money is spent as effectively as possible, it also improves the competitiveness of the RDEC scheme, and is a step towards a simplified, single scheme for all.
The reliefs are forecast to support £60 billion of R&D by businesses in 2027-28, a 60 per cent increase from 2020-21.
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 3 November to Question 74669, answered 3rd November on Research and Development Tax Credit, what resources HMRC allocates to (a) undertake compliance checks and (b) improve data-led risking processes; and whether those resources have increased in the last two financial years.
Answered by Victoria Atkins - Secretary of State for Health and Social Care
HMRC has staff deployed on R&D from across the department. This includes dedicated specialist teams focusing on compliance with the SME and RDEC schemes as well as teams working with large businesses on the RDEC scheme. These teams work with HMRC’s specialist Fraud, Risk & Intelligence colleagues as well as with customer service colleagues, lawyers and policy teams to support R&D claims and tackle error and fraud. This means that HMRC’s overall resourcing is difficult to measure exactly as staff from these wider areas also cover other work as appropriate.
The specialist R&D team focused on SME/RDEC compliance has more than doubled in recent years in response to the growing levels of error and fraud. This team is part of HMRC’s Incentives and Reliefs area of the business. As well as working on R&D, the Incentives and Reliefs teams also undertake compliance activity on other reliefs such as Creative Industries and Venture Capital. The total FTE for this wider team (excluding teams in Large Business, Fraud Investigation Service and Risk and Intelligence Service) is 245.
In HMRC’s Large Business Directorate, the resource assigned to R&D compliance is currently 6 full time equivalent staff. They are ring-fenced for carrying out R&D compliance and additional resource is flexed to deal with further risks as identified.
Asked by: Chi Onwurah (Labour - Newcastle upon Tyne Central)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, with reference to paras 3.25 and 5.70 of the Autumn Statement, CP 751, published on 17 November 2022, what estimate he has made of the cost to the public purse of the expressions of interest which will not now be taken forward.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
The government set out last week its plans to refocus the Investment Zones programme, building high potential clusters for our growth industries. As a result, the original Expression of Interest (EOI) process run by DLUHC has not been taken forward. The EOI process has provided important insights into local area’s growth needs and challenges, which will help DLUHC to design the refocussed programme. The government is grateful to local authorities for their work in developing Investment Zones proposals.