Government commits £86bn to science and technology: what it means for UK research and development
The UK government has committed £86 billion to fund research and development (R&D) as part of its Plan for Change, reinforcing its ambition for the UK to become a global hub for innovation.
Evidence shows that the average £1 invested in public R&D leverages double that in private investment and generates £7 in net benefits to the UK economy in the long run. The government’s investment commitment opens the door for many businesses to increase their R&D activity and potentially benefit from valuable tax relief on eligible spend.
What is exciting about the commitment made is that decisions on investment will be driven locally, maximise on regional specialisms -another from those focussing on renewable energy solutions off the North coast of Scotland to AI-driven med tech spin outs from Cambridge - and seek to further boost the 3 million essential R&D jobs in the UK.
Companies will continue to be able to access support from the government for its R&D, in the form of tax reliefs, further boosting impact. However, while this presents a significant financial opportunity, it’s essential to navigate the current R&D tax relief landscape carefully. Recent rule changes, compliance pressures, and HMRC scrutiny mean businesses must approach claims with a clear understanding of the risks, requirements, and potential reliefs available.
Investment aims to drive breakthroughs and commercialisation
According to government sources, the funding will support high-impact technologies such as AI, clean energy, semiconductors, life sciences, and quantum computing, with a strong emphasis on taking ideas from lab to market.
The ambition is to fuel the development of next-generation technologies, from longer-lasting batteries and personalised medicine to advanced materials and sustainable manufacturing. Crucially, the funding strategy encourages partnerships between industry and academia, with a focus on generating commercially viable outcomes from scientific research.
For innovative UK businesses, this represents a major opportunity to align with government priorities and secure support for future-facing projects.
How R&D tax relief and Patent Box can support innovation
Alongside direct government funding, businesses can access two key tax incentives:
- R&D tax relief provides enhanced deductions or payable credits for eligible expenditure on innovation projects that seek to resolve scientific or technological uncertainty.
- Patent Box offers a reduced 10% rate of Corporation Tax on profits generated from patented inventions that have been developed in the UK.
Used together, these incentives can significantly improve cash flow, enhance reinvestment in innovation, and increase the value of intellectual property.
Recent reforms to the R&D regime, including a single merged scheme for most businesses, mean that rules have changed, but the opportunity to benefit remains significant for companies conducting genuine R&D. For the newer businesses, perhaps starting from academic and industry collaboration, it is key they do not fall foul of missing their claim notification deadline.
For Patent Box, structuring partnerships and collaborations is vital; maximum benefit comes for a company whereby it both owns and continues to develop upon the IP; however, this is not always possible. Seeking professional advice on licensing agreements and royalty payments could have a significant impact on a company’s potential benefit.
A stricter approach to compliance
However, against the backdrop of this increased support, HMRC has made it clear that compliance standards are rising. In the most recent information released, HMRC confirmed it was opening an enquiry is 17 % claimants. Understanding and applying the legislation, and navigating all the changes, is complex, and choosing the best adviser for support is critical.
In our recent insight, Recent cases highlight rising R&D tax relief misuse, we explore HMRC’s growing concern over misuse of the R&D scheme, including high-profile investigations such as the 33 football clubs under review for potentially ineligible claims.
HMRC is now carrying out more checks, asking for more detailed information, and applying greater scrutiny across all sectors, not just high-risk areas. Even compliant businesses can face delays or enquiries if records are incomplete or if eligibility is not clearly demonstrated
Contact an R&D specialist
We support thousands of UK businesses to access R&D and Patent Box incentives, and to manage claims confidently in line with HMRC’s evolving expectations. Azets has extensive experience supporting businesses through the R&D tax relief process. Our integrated teams across R&D tax, innovation incentives, and tax dispute resolution can help you:
- Identify qualifying projects and expenditure
- Prepare defensible, fully supported claims
- Maximise available reliefs while managing compliance risks
- Make voluntary disclosures if needed
If you have concerns about your R&D tax relief position or HMRC’s increased scrutiny, please get in touch with one of our R&D specialists using the form below.
