On 18 March, Chancellor George Osborne unveiled the final Budget before the General Election scheduled for May. Amidst the headlines concerning income tax, ISAs, pensions and welfare, it can be easy to overlook aspects which are particularly relevant to science and technology. Here we briefly summarise the relevant provisions as announced in the Budget. Of course, depending on the outcome of the election, some or all of these measures may fall by the wayside, so businesses may be well-advised to exercise caution before taking any decisions based on these announcements.
This year’s Budget notably includes a number of announcements targeted at encouraging scientific research and development outside London, particularly in the Midlands and the North of England. With a well-established office in Oxford and recent expansion to Leeds and Manchester, Dehns is well-placed to assist businesses in these regions to take advantage of any such measures once the finer details become available.
Research and Development
The Chancellor has announced plans to commit £400m up to 2020-2021 to a competitive fund for “cutting-edge scientific infrastructure”.
£100m of funding has been announced for research and development in driverless car technology and related systems such as telecommunications.
£100m further investment has been announced for the UK Research Partnership Investment Fund round.
£40m of funding will be provided for developments relating to “Smart Cities” and the “Internet of Things” to support demonstrator programmes, business incubators and a research hub.
The Government plans to make loans of up to £25,000 available for PhD and Master’s degree students.
This year’s Budget also includes a number of measures aimed at promoting research and development in specific regions of England:
- £138m of funding (subject to a satisfactory business case) towards the UK Collaboratorium for Research in Infrastructure and Cities, to “ensure that the UK’s infrastructure is resilient and responsive to environmental and economic impacts”. This will be based in London, Birmingham, Newcastle, Sheffield and Southampton;
- £60m for an Energy Research Accelerator based at Warwick, Birmingham, Aston, Nottingham, Loughborough and Leicester Universities;
- An “Energy Systems Catapult” to be based in Birmingham to help bring innovations in energy research to market;
- £30m to support research at the Francis Crick Institute, with matched funding from Cancer Research UK and the Wellcome Trust;
- £20m for Health North to “promote innovation through analysis of data on the effectiveness of different drugs, treatments and health pathways”;
- £14m over two years for an Advanced Wellbeing Research Centre in Sheffield;
- Investment in technology incubators in Manchester (£4m), Leeds (£3.7m) and Sheffield (£3.5m) as well as a financial technology incubator in Leeds;
- £11.8m to develop a Centre for Agricultural Informatics and Sustainability Metrics, to be based in Hertfordshire;
- £1m for the Centre for Process Innovation, based in the North-East;
- Extensions to the existing Enterprise Zones (benefitting from enhanced tax relief and discounts on business rates) in Science Vale (Oxfordshire), Discovery Park (Kent), Manchester, Mersey Waters, the Humber, Leeds, and Tees Valley, and the creation of new Enterprise Zones in Blackpool and Plymouth.
The Government has also announced a commitment to review regulations together with business to determine where regulation could be inhibiting innovation.
The Government has proposed measures to improve the accessibility of R&D tax credits for smaller businesses, including providing guidance aimed specifically at small firms together with a “roadmap for further improvements over the next 2 years”, due to be published in Summer 2015. From Autumn 2015 HMRC will provide (on request) advance assurances, valid for 3 years, on whether R&D activities of SMEs qualify for tax relief.
The rate of above the line credit available for R&D tax credits will be increased to 11% for qualifying expenditure and the rate of the SME scheme will be increased to 230% from 1 April 2015. However, qualifying expenditure for R&D tax relief will be restricted, so that costs of materials are not eligible.
The liability of academics for Capital Gains Tax arising from the sale of shares in spin-out companies will be reviewed.
Although not announced in this year’s Budget, businesses should also remember that the UK Patent Box regime remains open to new entrants until June 2016.
Subject to approval, the following amendments have been proposed for the Enterprise Investment Scheme (EIS), Seed EIS (SEIS) and Venture Capital Trust (VCT) relief schemes:
- Introduction of a £15m (or £20m for “knowledge-intensive companies”) cap on total investment received under qualifying venture capital schemes;
- A limitation that companies must now be less than 12 years old to qualify for EIS or VCT investment, unless the investment is for a “substantial change in activity”;
- A doubling of the employee threshold for “knowledge-intensive” companies;
- A proposal to remove the requirement for companies to have spent 70% of SEIS investment before qualifying for EIS or VCT funding.
Oil and Gas
Against the backdrop of declining oil and gas prices, the Chancellor has announced:
- A new Investment Allowance for businesses investing in the North Sea oil and gas fields;
- Cuts in Petroleum Revenue Tax from 50 to 35% and in the Supplementary Charge from 30 to 20%;
- £20m in funding for seismic surveys of the UK Continental Shelf;
- Allowances for development of high pressure, high temperature projects, with partial exemption of profit from the Supplementary Charge.
The following measures have been announced:
- Extension of the broadband connection voucher scheme (supporting broadband internet upgrades for SMEs) to a total of 50 cities from 1 April (the scheme remains open until March 2016);
- £600m to support the clearing of the 700 MHz spectrum for 4G mobile communications.