Tax Partner and Head of UK Innovation Incentives, Mazars
Tax expert says there needs to be more awareness and clearer objectives around tax incentives to help encourage those companies who want to grow through research and development.
Businesses seeking to grow and develop through innovation and help play a part in boosting the national economy need more clarity around the objectives of current tax incentive regimes that would help them to do so.
According to Gary Collins, Tax Partner and Head of Innovation Incentives for Mazars — a leading financial advisory consultancy dedicated to helping companies make the most of business opportunities, there are a lot of mixed messages from clients about the support available.
Working nationally and internationally, his focus is on innovation, and he advises UK-based clients on incentives delivered through the tax system such as research and development (R&D) tax credits and the Patent Box initiative — designed to encourage companies to keep and commercialise intellectual property in the UK.
Make tax incentives encouraging
He says: “When we talk to clients, I think one extreme is that people are not aware of what support exists, which in itself is rather defeating the objective of having incentives if companies aren’t encouraged to participate in them.
“And then at the other extreme, you get those who feel the regimes are difficult to navigate and need people like us to help them through, but typically, that is not going to make people innovate more or be active in the space.”
Collins asserts the fundamental problem seems to be that the tax regime around R&D does not align with any other particular policy initiatives the Government might have. “It basically exists to provide money for support with innovation, but it doesn’t say what it is trying to achieve,” he adds.
“There is really nothing in the way of targeting or using targeting that produces an outcome which aligns with other policies.” For example, he explains: “Most countries around the world have within their tax regimes a tax incentive system which is very much focused on net zero, or ‘green’ policies, but our tax system currently doesn’t — although all the tools are in place.”
It’s not just about being innovative but being
good corporate citizens, and we look to
help businesses get better at that too.
Instilling clear objectives
Recent rule changes have been made to encourage companies to actually undertake activities in the UK as opposed to overseas which implies the Government is keen to develop jobs within the innovation space in the UK.
“That is a good objective and one we can identify, but it is more implicit than explicit, and as I say, we have these tools of policy that don’t seem to be used — or if they are, it doesn’t seem to be very clear on what the objectives are,” he says.
A lot of publicity around the R&D tax regime has recently been quite negative because it is perceived there is a lot of abuse of the scheme whereby some taxpayers are making claims when they are not entitled.
Collins concludes: “This whole issue around abuse and avoidance will never be completely eliminated but, if you had that clarity, I think you would actually remove a lot of them from the system. It’s not just about being innovative but being good corporate citizens, and we look to help businesses get better at that too.”
In the recent Spring Budget, incentivising innovation was referenced in several announcements, most notably on R&D tax reliefs, but also within the support for emerging digital technologies and the reforms to audio-visual tax reliefs.
Collins concludes: “It was reassuring to see a Budget that was full of references to the importance of innovators and the creative industry in developing wealth for our nation — and that recognises a need for the state to have a role in supporting these activities.”