Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment she has made of the potential a) merits of extending the R&D Expenditure Credit to include capital expenditure and the b) impact of that measure on allowing start-ups and pre-profit companies to invest and scale in the UK.

At Autumn Budget 2024, the Government made a number of commitments on R&D tax reliefs as part of the Corporate Tax Roadmap to provide the stability and certainty that help support investment decisions. The Government committed to maintaining the generosity of the rates in both the merged R&D Expenditure Credit (RDEC) scheme and the Enhanced R&D Intensive Support (ERIS). This, combined with the commitment to cap the headline rate of Corporation Tax, means that companies doing qualifying R&D will continue to receive between £15 to £27 for every £100 spent on R&D.

The RDEC rate of 20 per cent represents the joint highest uncapped headline rate of R&D tax relief in the G7 for large companies, and the ERIS scheme will provide around £1.3 billion per year to eligible R&D-intensive, loss-making SMEs. Overall, R&D reliefs will support an estimated £56 billion of business R&D expenditure in 2029/30, roughly a 20 per cent increase from £47 billion in 2022/23.

Companies are not currently able to claim R&D reliefs on capital expenditure, but the Government keeps the whole tax system under review.