EDM 1373: Impact of research and development tax credit policy on UK innovation and SMEs

That this House notes with concern the case of Horizon, a retail design and brand communications agency based in Ely, East Cambridgeshire, which has been adversely affected by recent changes to the research and development tax credit scheme; recognises Horizon’s contribution to UK innovation and exports, having grown over 15 years into a medium-sized enterprise employing approximately 75 people and generating £9.5 million in turnover, half of which is from international trade; acknowledges that Horizon’s growth was significantly supported by reinvestment in research and development and the responsible use of research and development tax credits, which enabled the development of award-winning retail display solutions; expresses concern that a recent investigation led to the rejection of their 2023-24 research and development claim, a retrospective repayment of over £120,000, and a prohibition on future claims; notes the company’s subsequent decision to relocate design and development functions outside the UK, citing a lack of support for innovation; warns that such outcomes risk undermining UK competitiveness, innovation, and SME growth at a critical economic juncture; further acknowledges that while there may be cases of non-compliance, and condemns any deliberate misuse of the research and development scheme, the current approach must strike a fair balance, supporting genuine innovation while ensuring proportionate and timely enforcement; and urges the Government to review the implementation of research and development tax credit policy to ensure it supports genuine innovation, prevents abuse without penalising legitimate claims, and sustains the UK’s position as a global leader in creative and technological enterprise.