TaxCorporate TaxICAS calls for simplified R&D tax credit

ICAS calls for simplified R&D tax credit

ICAS today urged the government to ensure simplicity in Treasury proposals for a new tax credit for research and development at large companies.

Responding to consultation, ICAS called on the Inland Revenue to shift towards the Canadian example. Canada offers a simple credit that gives companies a significant cash contribution.

James Robertson, convenor of ICAS’s taxation practices committee, said: ‘If the government wants to support R&D in large companies the prime requirement is that it should be simple, straightforward and sufficiently generous to have an effect.’

But, the institute warned against offering a broad relief at an inadequate rate, which it claimed would fail to attract new R&D activity.

The Treasury in conjunction with the Inland Revenue has proposed three options:

  • First is a simple volume scheme in which the R&D tax credit is given on all qualifying R&D expenditure;
  • Second is a two-tiered volume system in which tax relief is set at a higher rate on R&D expenditure up to a threshold of £100m and a lower rate on additional R&D expenditure above this level.
  • The third option is a baseline volume scheme in which the credit has a group specific baseline, for example 50% of its R&D expenditure in 2000, above which a simple volume credit is paid on R&D expenditure.

ICAS favours the first option but at a flat rate that is attractive.

Derek Allen, director of taxation at ICAS, added: ‘There’s a lot to commend if things are kept simple and straightforward. It’ll be more transparent and easier to police.’

Consultation ends on Friday, 18 January with the aim of finalising its decision to be included in the March Finance Bill.

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