It has been over three years since the results of the EU referendum were announced and the term ‘Brexit’ cemented its place into everyone’s vocabulary.

The results have undoubtedly divided a nation, creating confusion and uncertainty for individuals and businesses. The level of uncertainty has hurt businesses, creating anxiety for the future, particularly those that have a supply chain with EU countries and businesses relying on EU funding. The government has stated that UK organisations will continue to receive funding over their project’s lifetimes if they have successfully bid into EU-funded programmes before we leave the EU.

However, the way we leave the EU will inevitably have an impact going forward. Businesses should investigate all sources of funding; R&D tax credits is a perfect example. A qualifying SME on average claims back £53,000, money of which can be used for any purpose.

How will Brexit affect R&D tax credits?

How Brexit will affect the R&D tax credit relief remains unknown.

There are two R&D tax credit reliefs; one for SMEs and the other for large companies. Which relief a business claims under will depend on the company size, turnover and their access to grants. The EU currently regulates the SME scheme, which operates under what is known as the State Aid rules. State Aid rules are compulsory for national governments to follow, they are designed to safeguard fairness in competition for EU countries. The SME scheme is incredibly generous, allowing you to claim up to 33% of your R&D costs. As a result, the SME scheme requires approval from the European Commission in a process known as ‘notifying’ the State Aid.

Technically, when these EU constraints are uplifted, the UK can determine its own rules. This could present the opportunity to increase the percentage of costs a company can claim back, making the UK an even more attractive place to do business. However, there are many factors to consider and the government will need to take all into consideration if any changes are made.

Further uncertainty from leadership race

The seven-week leadership election created further uncertainty for business. Initially there were ten candidates putting their hat in the ring, all of which had differing priorities and pledges, Brexit of course the one topic that united the opponents.

Whether you think Mr Johnson was the correct decision or not, the conclusion of the leadership race and swift cabinet reshuffle should hopefully provide a level of stability.

Last week’s opening speech was delivered with energy and enthusiasm and as suspected covered a magnitude of topics.

Matthew Jones, Managing Director at LimestoneGrey, commented:

“As suspected, Brexit was awarded centre stage during the Prime Minister’s first speech, with policing, the NHS, social care and education also party in the discussion.

“A significant proportion was dedicated to highlighting the country’s strengths in areas such as life sciences, tech and financial services and applauding the innovation that is taking place. We are all aware of the unbelievable growth in the Fintech arena but there are also disruptive waves being made in manufacturing, engineering, biosciences and technology to name but a few, despite the uncertain future.

“Mr Johnson’s pledge to provide extra incentives to invest in research will be a fantastic boost to industry and one which I hope will come to fruition.

“How Brexit will affect the R&D tax credit scheme is yet to be decided. It should be nurtured as it is a great way to reward and encourage domestic innovation, but it is also a tool to attract inward investment. Many countries have an R&D incentive scheme in place, so we need to make the UK compete on a global stage.”

The next few months will be key for the future prosperity of UK businesses in terms of the Brexit outcome and the delivery of the Prime Minister’s objectives.