Alexis Marz MMP Tax
Alexis Marz 09 April, 2020

Scary headlines have popped up in the papers about Jeremy Corbyn scrapping the R&D Tax Relief and Patent Box schemes if he becomes PM

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These are generous allowances, for instance the R&D Tax Relief provides up to 33% cash back for every pound spent on research and development (R&D). There were nearly 40,000 R&D claims made in 2016/17 which resulted in £3.5bn of tax relief support. Eliminating these reliefs would have a dramatic effect on innovative businesses across the UK.

Should you be worried about any of this just yet?

The history of the schemes can give us a good indication of their likely future. These tax incentives have benefited from broad cross-party support in the past. The original R&D Tax Relief scheme was introduced in 2000, under Tony Blair’s Labour government. This scheme has been expanded, with new incentives introduced (such as Patent Box and Creative Sector Tax Reliefs), under more recent Conservative and Coalition governments.

But what will a future Labour government under Jeremy Corbyn do? Well, at this stage no one knows. There’s nothing in the manifesto (released in 2017) for us to refer to. Plenty of mentions of ‘tax’, zero references to ‘R&D Tax Relief’ or ‘Patent Box’.

But we can get some indicators from the recent IPPR (Institute for Public Policy Research) report ‘Prosperity and Justice: A Plan for the New Economy’. The contents of the report aren’t official Labour Party policy, but have been highly praised by Jeremy Corbyn and John McDonnell. The report calls for “the phasing down and eventual abolition of R&D tax credits other than for SME firms younger than seven years old, and the phasing down and abolition of the patent box.”

“Eliminating these reliefs would have a dramatic effect on innovative businesses across the UK”

This echoes what they had to say in 2016 about the Patent Box and R&DTR schemes.

On the face of it, this would be extremely alarming. But the Conservative party made similar noises, particularly in the Dyson report, (PDF download) before they came into power.

On the whole, the UK needs to remain competitive, particularly in a post-Brexit world. And these incentives are a key part of retaining that global competitiveness.

They’re also low on the list of priorities for an incoming prime minister. If a new Labour government is elected, and wanted to shake things up, it’s unlikely that they would start with the R&D Tax Relief and Patent Box.

To look at it overall, the chances of R&DTR or Patent Box disappearing any time soon are relatively low but it wouldn’t hurt to keep an eye on political changes in the near future.

If you would like to discuss this topic further, please get in touch or to speak directly and confidentially to a consultant, call us.

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Alexis Marz MMP Tax
Written by Alexis Marz

Alexis is one of the founding Directors of MMP Tax.

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