Taxation – Business’ R&D long-term credit

The proposal for a new tax credit on a company’s R&D, to supplement the current tax relief, was clearly aimed at fostering long-term growth. But the immediate reaction from small business was a negative one.

Brendan Burns, national vice-chairman of the Federation of Small Businesses, argued that the measure failed to address the taxation needs of the expanding self-employed sector which does not pay corporation tax. ‘What is the government going to do about the self-employed? If it offsets the tax credit against corporate tax, it won’t help the self-employed one bit,’ he said.

David Harrison, national tax director for Kidsons Impey, said that, while an R&D tax credit for small companies would provide vital funding at an earlier stage, it would mainly benefit sprawling multinationals.

‘For the majority of SMEs outside the hi-tech sector with a turnover of less than #5m, R&D doesn’t come into it. It’s mainly larger companies like pharmaceuticals which have to undertake research to keep ahead of their competitors.’

Related reading