Source · Select Committees · Public Accounts Committee
Recommendation 21
21
Rejected
The government has a target of 2.4% of GDP to be spent on research and...
Recommendation
The government has a target of 2.4% of GDP to be spent on research and development.32 To encourage this investment, HMRC administers tax reliefs to companies via two schemes – one for large companies and one for small and medium-sized enterprises. HMRC said that the scale of the schemes is growing all the time. HMRC said that it has published research that demonstrates that the two schemes increase research and development investment, albeit marginally for small and medium-sized enterprises. While this research demonstrates what additional research and development activity was stimulated, it does not quantify the benefit to the UK economy.33 26 Qq 47–49; C&AG’s report, para 7 27 Qq 58, 66 28 Qq 30, 47–48, 51, 55 29 Q 51 30 Q 60 31 Q 64 32 Q 96 33 Qq 103–106 HMRC performance in 2021–22 15
Government Response Summary
The government disagrees with the recommendation, stating that HMRC has already published reports on the additional R&D expenditure stimulated by tax relief schemes and that further analysis will be carried out in the future but not within 12 months, although an update will be provided within that period.
Government Response
Rejected
HM Government
Rejected
7: PAC conclusion: Research and development tax reliefs are costly, prone to abuse and provide questionable benefit to the UK economy. 7: PAC recommendation: HMRC should develop its analysis of the additional research and development expenditure its relief schemes result in, to consider what impact that expenditure has on the UK economy. HMRC should report to the Committee on its findings within 12 months. 7.1 The government disagrees with the Committee’s recommendation. 7.2 HMRC has already published reports on the additional research and development (R&D) expenditure stimulated by the R&D tax relief schemes. 7.3 There is also a wide range of academic studies that have shown that R&D expenditure has positive impacts on economic growth. 7.4 HMRC intends to carry out further analysis in future to evaluate the impact on R&D expenditure of upcoming reforms to R&D tax relief policy, once the data is available. It will not therefore report within 12 months, although HMRC will provide an update on progress within that period.