Give tax credits for all R&D, says CBI
The Confederation of British Industry has called on the government to extend company tax credits to all spending on research and development, not just for extra spending as proposed.
The Confederation of British Industry has called on the government to extend company tax credits to all spending on research and development, not just for extra spending as proposed.
In a paper submitted to the Treasury, the CBI called on chancellor Gordon Brown to ‘adopt a volume-based approach’ to R&D tax credits and that all expenditure on R&D in the UK should qualify’.
And it warned that giving credits for additional R&D expenditure only would not help companies that regularly invested large amounts of money in innovation.
The Treasury has proposed an incremental R&D tax credit for larger companies, based on expenditure exceeding average levels, to be introduced in the next Budget, adding to the 30% R&D tax credit currently available to all SMEs.
But according to the CBI, the ‘incremental approach’ would act as a deterrent to companies investing in R&D, forcing them to ‘wrestle with a complex formula for calculating the credit that might be available’.
The confederation said a ‘volume-based approach’ would be of most benefit to innovation-driven sectors, and would be vital to ensuring the UK continued to compete in the ‘knowledge-driven economy’.
John Cridland, CBI deputy director-general, said there was ‘overwhelming support’ for R&D tax credits, but said companies wanted ‘an incentive that encourages high-levels of sustained investment, not a series of peaks and troughs’.
Any credit, he said, needed to be set at a meaningful level.
But, the CBI admitted its volume-based approach would be more costly than an incremental approach. With business spending £13bn a year on R&D, a 5% across-the-board tax credit would cost the Treasury £650m, while a 10% credit would cost £1.3bn.
The Institute of Fiscal Studies has estimated that under the Treasury’s proposal, R&D tax credits would cost between £70m and £130m.
Links
Labour unveils second-term plan
R&D relief for large companies
CBI’s proposal to the Treasury on R&D tax credits