Throughout our history, Britain has been the source of some of the world’s most transformational technologies that have, directly or indirectly, improved the quality of life for billions of people and changed the face of business & commerce. The First Industrial Revolution, starting in the late 18th century, saw the rise of steam power and mechanised textile production, before rapid standardisation and industrialisation followed during the Second Industrial Revolution in the late 19th century. The Third Industrial Revolution marked the start of the ‘digital age’ where innovators, such as Tim Berners-Lee, brought semiconductors, mainframe computing, personal computing, and the internet to the masses.
We stand on the brink of a new technological revolution that will fundamentally affect the way we live, work, and communicate. The scale, scope, and complexity of this transformation will be unlike anything humankind has experienced before.
What is The Fourth Industrial Revolution?
Although one could consider the Fourth Industrial Revolution (FID) a prolongation of the third, it is distinct in that its velocity, scope, and impact on systems has no historical precedent. The FID is characterised by the fusion of technologies – such as artificial intelligence (AI), gene editing, and robotics – that blur the lines between the physical, biological, and digital worlds.
This new era of rapid innovation will disrupt nearly every industry around the world and create a host of new challenges and opportunities for organisations, individuals, and places to contemplate. The possibilities of billions of people connected by mobile devices, with rapidly increasing processing power, storage capacity, and knowledge accessibility, are endless. Every year we see breakthroughs in emerging technologies that can be fused together to solve challenges and create new opportunities. Such emerging technologies include robotics, nanotechnology, 3D printing, quantum computing, next generation batteries, internet of things (IoT), AI, and biotechnology.
The Government’s ‘Regulation for The Fourth Industrial Revolution’ White Paper
In 2019, the government commissioned a white paper to plan how the UK’s regulatory system should be maintained during this period of rapid technological change. The UK ranks in the top 5 in the Global Innovation Index and is home to some of the world’s leading innovators and universities – a position the government will look to maintain through the launch of its Industrial Strategy.
The Industrial Strategy has 4 grand challenges designed to capitalise on the opportunities presented by the FID:
- We will put the UK at the forefront of the artificial intelligence and data revolution.
- We will maximise the advantages for UK industry of the shift to clean growth.
- We will become a world leader in shaping the future of mobility.
- We will harness the power of innovation to help meet the needs of an ageing society.
These challenges are a direct response to the FID and will involve the development of an agile regulatory approach that will facilitate UK innovation while protecting citizens and the environment.
What does this mean for the R&D Tax Credits scheme?
The government plans to raise the UK’s total investment in R&D from 1.7% of GDP to 2.4% by 2027. To achieve this target, the government has committed to raising public investment to £22 billion per year by 2024/2025 – the largest increase in history. The increased funding is expected to give businesses the confidence to develop and adopt ‘world first’ technology here in the UK while being supported by revised regulatory frameworks.
The government has yet to announce how the R&D Tax Credits (SME) and RDEC schemes and their regulatory frameworks might be affected by the Industrial Strategy. Despite this uncertainty, the government remains committed to incentivising R&D activity as evidenced by its record-breaking investment pledge. This commitment should give innovative British businesses the optimism to continue, or even expand their R&D investment knowing that corporation tax relief will likely result, should all qualification criteria be met.
Businesses should continue to plan, implement, and record their R&D activity as per the existing guidelines outlined by The Department for Business, Energy & Industrial Strategy (BEIS). We will update this page when (or if) changes are implemented to the R&D Tax Credit scheme regulatory framework and guidelines.
If you would like Cost Care Tax to work with you to advance your R&D claim, please get in touch and speak to one of our friendly advisors for a free, exploratory assessment of your R&D projects.