The UK will become an “innovation wasteland” if the government pushes ahead with plans to slash research and development (R&D) tax relief, the Federation of Small Businesses (FSB) has warned.

The UK’s largest business group urged ministers today to reverse plans to gut the R&D tax relief scheme, announced by Chancellor Jeremy Hunt in November, claiming that the plans would spark a mass withdrawal of the UK’s small firms from innovation projects.

The Treasury hit back at criticism saying it recognises R&D’s “hugely important” role while inciting the tax relief review will “ensure taxpayer’s money is spent as effectively as possible”.

Start-ups and smaller firms reaped the benefits of the UK’s R&D system which offered rebates on innovation spending. However, Hunt announced plans to scale back the rebate to reduce fraud while offering more credits to bigger companies.

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