New Government Grants announced.

Yesterday the government announced their intentions for a new tax incentive for businesses doing R&D. 

Even though the final policy has not yet been written there is to be a consultation with businesses which will be followed by suggested changes and then the normal legislative process, including select committees etc will dictate the final form of the support to be provided. The intent is that the new tax incentives for R&D will be in place by the April 2019 financial year. 

The plan has several good things about it and several issues that need to be worked through.

I like a lot of the features but the government is still going to need to be careful on how businesses will use this because in the previous tax incentive scheme, many years ago ,it was obvious that some businesses used to rort the system. The new proposal says it has checks and balances to avoid this. I hope they work but only time will tell.

The current system of grants administered by Callaghan Innovation allows for a cradle to grave type of support for businesses with no real gaps in funding. 

The new proposal does not yet outline how this will work in the future except to say that the only grant from the current stable being changed is the growth grant. 

There is one major issue, that while mentioned in passing, will be fixed by 2020. This is around funding for loss making businesses. The current Growth Grant does not make a distinction between profit and loss companies. This means that some current recipients maybe be a lot worse off. Again time will tell. 

However, the new tax incentive scheme may, as suggested, at least sort out the companies that don’t truly need to be funded by the state but who currently may receive such funding because of a narrow set of rules which govern the current Growth grants. 

More next week.

Ross