Industry body demands broader R&D tax credit

A UK IT industry body has criticised the direction the government is taking on the R&D tax credit, saying it is not doing enough to keep the UK competitive
Written by Matthew Broersma, Contributor

Intellect, a trade group representing IT businesses such as Microsoft and Intel in the UK, has criticised the way the government is handling its tax credit for research and development. The group believes the credit is critical for the international competitiveness of UK IT companies.

Intellect says that the government's current consultation on the tax credit, launched on Friday, doesn't go far enough in examining what types of expenditures companies can include under the credit. "(Friday's) Treasury Consultation Document on R&D tax credits needs to go further to deliver an effective rate and assure the UK's international competitiveness," the group said in a statement.

In its current form, only 50-66 percent of R&D spending can be claimed under the credit, according to figures supplied by Intellect's member companies; for example, the IT infrastructure needed to support R&D programmes isn't covered by the credit, Intellect said.

The consultation document covers such issues as the definition of R&D for tax purposes and the inclusion of certain types of software in the credit.

In April's Budget, the chancellor, Gordon Brown, announced a consultation into the current guidelines on R&D tax credits. He also said that they will be extended to cover spending on cutting edge software for research and development purposes. Intellect and others welcomed the announcement at the time, but others said it did not go far enough.

Payment processor WorldPay argued the credit should have been expanded to boost e-commerce companies and smaller businesses, instead of focusing on corporate research.

Intellect is carrying out a survey of its member companies' experiences with the credit, the results of which will be released in the late summer. The group said that the credit, if implemented properly, could improve the UK's ability to foster competitive technology companies.

"Engineering R&D and software R&D are now clearly established as eligible for the tax credit. However, the definition can be further improved so that industry is more certain that their R&D activities will qualify," said Tom Wills-Sandford, Intellect's director of campaigns, in a statement.

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