Over the past couple weeks, we have been unpacking the announcements from the budget. We’ve already looked at the new Help to Grow Scheme, the new super-deduction and changes to the immigration system in previous posts. But we also want to explain the issues where entrepreneurs can influence the government’s thinking.
On that note, the Government published a range of consultations and reports on a range of issues to do with taxation today. You can see the full list here.
This update is slightly different to our usual updates. In this post, we’ll highlight a range of reviews and consultations announced by the Chancellor at the Budget and on what’s been dubbed ‘Tax Day’. If entrepreneurs respond to the government’s calls for evidence then it is more likely that we can get policy changed for the better.
R&D Tax Credits
Over the past two years, we have been arguing that the scope of the R&D Tax Credit should be expanded to cover data and cloud computing. So we welcome the news that a new consultation announced at the budget will look at the following areas:
How the two R&D relief schemes support R&D in the UK, including how they operate, how they interact with the way modern R&D is done, and the main differences in design between them.
Whether the schemes should be amended to remain internationally competitive and keep the UK at the cutting edge of innovation
Whether the definition of R&D and the scope of what qualifies for relief remain fit for purpose.
Whether current rates of relief, and the difference in rates between RDEC and the SME scheme, remain appropriate.
As former Prime Minister Theresa May pointed out in Parliament recently, there have been a range of reviews on R&D but as of yet, little action has been taken. Hopefully, this time will be different.
The Government wants to hear from “firms that undertake R&D, or might consider doing so in future”.
It is asking questions such as:
Do you think R&D tax reliefs could better incentivise R&D with specific social value, for example developing green technology?
Could R&D tax reliefs be used to disincentivise R&D in certain fields?
Are there any other areas of qualifying expenditure that should be included within the reliefs? How would this influence your investment decisions?
You can read the full consultation document here and if you want to send in a submission you can send it to RDTaxReliefs@hmtreasury.gov.uk
The deadline for submission is 2nd June.
Stock Options
The Enterprise Management Incentive allows startups to benefit from tax relief when they grant their employees stock options. It’s a great system for empowering employees and helps the UK remain internationally competitive for high skilled workers.
However, while the UK’s scheme at one point was a world-beater ,other countries have caught up. As a result a number of organisations, including ourselves, have argued that we need to expand the scheme so more scale-ups can benefit. We set out the reasons why this would be good for the UK’s startup ecosystem in our Startup Manifesto.
It’s welcome then that the Government is reviewing the scheme “to ensure it provides support for high-growth companies to recruit and retain the best talent so they can scale up effectively, and examining whether more companies should be able to access the scheme.”
They’ve launched a Call for Evidence which you can read the terms of here. If you’ve used the scheme or want to see it expanded then you can email a submission here.
Pension fund investment into VCs
Pension funds contribute 65% of the capital in the US VC market and 18% in Europe, but just 12% in the UK. There has been serious talk over the past five years of finding a way to get more pension funds to invest into venture capital. One of the barriers we identified in our report Unlocking Growth was the Pension Charge Cap. It’s designed to protect pension holders from being overcharged on active management fees, but has had the unintended effect of making it difficult for pension funds to invest in venture capital as VC funds require hands-on management.
It’s good that the Government has announced that this will be reviewed in the coming months. If you are thinking of writing a submission, you can see the full terms of the consultation here.
The Call for Evidence closes on 16th April.
Timely Payment
Should the tax payments for companies and individuals outside existing regular payment systems such as PAYE become more frequent? As part of the Government’s new 10 year tax administration strategy, they have just opened a call for evidence.
It asks questions such as:
Do you agree that if there is to be a more frequent tax payment regime, it should generally be based on current year liability?
What are your views on using digital solutions to facilitate in-year calculation, and what and how could specific groups be affected negatively by this?
Do you have any initial views on the benefits and challenges of monthly, quarterly, or other, payment frequency?
What methods do taxpayers use to budget for their tax bill?
If you want to give evidence you can see the full terms of the consultation here.
It closes on 13th July.
If there are any other consultations you are interested in or want to work with us on a submission for, then please get in touch.