Industry calls for R&D tax credits shake-up

Refining the research and development (R&D) tax credit system should be on the Treasury’s agenda in next week’s Budget, say industry groups.

R&D tax credits were introduced in April 2000 to stimulate innovation and to help boost UK competitiveness.

But the scheme has been criticised for being too inconsistent and over complicated, particularly for IT R&D that can be harder to define in traditional terms (Computing, 7 December).

Industry trade body Intellect anticipates details in the Budget about the creation of specialist centres to deal with smaller firms’ claims, and improved training for tax inspectors.

‘We are expecting details of how inspectors are going to be trained in the software industry and therefore more equitable in their treatment of software R &D claims,’ said deputy director general Tom Wills-Sandford.

Jeremy Beale, head of ebusiness at the Confederation of British Industry, says in the longer term the Treasury should consider including training in the credit scheme.
‘There is nothing in the system for training the people essential for the R &D,’ he said.

The scheme could also be extended to cover key business skills not included in degree courses.

‘There are issues about technology graduates not having the right skills, and it is often a question of drawing on people already in the business,’ said Beale. ‘That is a complicated process, and a tax credit might help to make it more attractive.’

Jim Norton, senior policy adviser at the Institute of Directors, says the Treasury can use next week’s Budget to lead by example and include business change in Whitehall's IT budgeting.

‘I am dubious that the levels of savings envisaged by the Efficiency Review can be delivered without an entirely new approach,’ he said.

‘The Budget is an opportunity for the Treasury to turn over a new leaf and be realistic, as opposed to knowingly under-budgeting by not accounting for the business change element.’