Government to press on with plans for R&D tax credits

The government is to press ahead with plans to create special units for
assessing R&D tax credit claims.

The chancellor was notably quiet in the Budget speech about the plans
announced in the pre-Budget report, and Budget documents provided little further
detail.

But the plans are believed to be going ahead, with an announcement due later
this year.

The government is looking at the location of the specialist offices, and
training for inspectors, which is expected to be focused on engineering and
software.

Software claims have been cumbersome to prove, with the government
embarrassed by the BE Studios case, which highlighted the difficulty SMEs have
in making claims for the flagship scheme.

The chancellor did announce changes to the credit in the Budget, raising the
threshold from 250 to 500 employees for those eligible for the more generous SME
credits.

The moves have been questioned, however, by the Institute for Fiscal Studies,
which suggested that the low costing of the move in Budget documents provided
for only a partial extension of the credit.

Robert Chote, director of the IFS, urged MPs to ask Gordon Brown about how
the move had been costed, at a Treasury select committee meeting last week.

The credit is offered in various ways, and the IFS believes that one of the
more generous methods of obtaining the relief has not been extended to these
companies.

David Cobb, an R&D relief specialist at Deloitte, told Accountancy Age
that he did not know precisely how many companies would qualify for the new
extended credits. Many have speculated that there simply may not be many
companies that fit the criteria, as the extension of the employee threshold is
not accompanied by a raising of other rules relating to the move.

Companies must have a turnover of less than E50m (£35m) and gross assets of
less than E43m to qualify for the SME credits.

Details are awaited in the finance bill, which is due to be published
tomorrow.