Chancellor Gordon Brown announced the measure, aimed at improving the innovation and competitiveness of the UK in an increasingly tough global market, in his budget yesterday.
‘I have decided, following consultation, that we will legislate, for large companies, for a new volume-based research and development tax credit…it is a £400m boost to innovation and research in Britain and to modern manufacturing in our country,’ he said in his Budget speech.
The tax credits, allowing companies to make claims for 125% of their total qualifying research and development spending, will be available to 1500 businesses which collectively spend over £11bn a year on research.
Small and medium-sized firms have been eligible for the credit since 2000 and this move extends it to larger companies.
Digby Jones, director general at the Confederation of British Industry, welcomed the news.
‘This is a significant boost to UK innovation. We would like it increased but this is a good start for a credit that will make a real difference, provided the government sticks with it over the long-term,’ he said.
Industry body the Computing Services and Software Association said the tax credit will make a significant impact in boosting cutting edge technology research.
‘The importance of enterprise to the vitality of the UK economy has once again been recognised by the Chancellor. While we would have liked to have seen an extension to the current three year scheme which allows SMEs to write off the purchase of IT equipment, we believe this Budget provides a positive basis for future reform,’ said John Higgins, director general of the CSSA.
Other measures to benefit IT in the UK included a £420m direct cash boost to encourage SMEs to put tax and payroll systems online and the modernising of tax treatment for intellectual property, which could save businesses £200m a year.
Reaction was not all positive, however, with anti-IR35 campaigners, the Professional Contractors Group, warning its members would find it increasingly difficult to operate in the UK.
‘What is certain is that the one per cent increase in national insurancerates for employers, employees and the self employed will hit all smallbusinesses including our members very hard,’ said Jane Akshar, chairman of the PCG.
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