IT industry issues from Intellect - read our blog...
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21/03/2007
Intellect, the UK trade association for the IT, telecoms and electronics industries, believes that the proposed increase in research and development tax credit for large companies announced in today's budget is insufficient to have a real impact and will not help the UK catch up with competitor nations in terms of R&D spend. Intellect has lobbied the government for a substantial rise in R&D tax credits for large companies for the past four years. Although the new rate will be 130 percent, many costs involved in an R&D project are not eligible for the credit and corporation tax is still applicable, creating a real value of the tax credit of about four percent. This is an increase of just half a percentage point. Tom Wills-Sandford, deputy director general, Intellect commented: "R&D is fundamental to the success of UK's knowledge economy and the UK has lagged behind its international competitors. Gordon Brown has reiterated his ambitious target of 2.5 per cent of UK GDP spent on R&D by 2014. This represents an increase of one third in seven years. When we consider that R&D spend has either fallen or been flat over the past few years, this target becomes even more challenging. Although the tax credit is just one factor for companies deciding upon R&D projects, it can still act as a real incentive. To attract multi nationals to undertake R&D in the UK, the R&D tax credit needs to rise to at least 150% for large companies, which equates to 6-8% in real terms." Intellect believes that the R&D tax credits for small and medium sized companies is working well and welcomes the increase from 150 to 175 percent.
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