HM Revenue & Customs (HMRC) has issued a new report on research and development (R&D) decision-making processes in British businesses.
The report, released in November, explores the role of government support in the decision-making process and identifies the effects of R&D tax reliefs and grants on business behaviour.
It concludes that because most businesses involved in R&D see it as a “vital, often intrinsic part of their work” they already carry out as much as they can afford and are keen to do more.
Although it says that government support is viewed as “enabling rather than motivational” it adds that: “Grants allow companies to conduct R&D project which they would otherwise have been very unlikely to pursue (and)…tax credits do appear to increase the overall budget available for R&D within the company”.
However, it also found that many companies consider the procedure around grant applications to be time-consuming and onerous while most of the respondents involved in its research “know little about the process and progress of tax credit claims”, with, typically, little communication between finance and R&D functions when the claim is submitted or afterwards.
But it adds: “However, once the routine of claiming is established, the company tends to gain confidence in the likely availability of this funding stream and begins to rely on it as part of the budget for reinvestment in future R&D work.”
The report suggests that support for R&D is likely to continue, concluding: “Alongside the monetary value of the government support, the message sent by the system of R&D tax credits and grants is important to companies engaged in R&D. Any attempt to reduce their availability would be interpreted as a statement that government no longer values the contribution of R&D in this country.”
LINK: The HMRC report