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11/07/03
Intellect calls on Treasury to go further to deliver an effective R&D tax credit rate for industry
ntellect, the UK association for the technology industry, issued a warning that yesterday's Treasury Consultation Document on R&D tax credits needs to go further to deliver an effective rate and assure the UK's international competitiveness. Intellect is disappointed that the scope, namely what expenditure is eligible for the credit, is not covered in the Consultation. Following a detailed investigation by member companies, Intellect estimates that only 50-66% of R&D expenditure is eligible. For instance the cost of the IT infrastructure to support R&D is not treated as an eligible cost. This reduces the effective rate of the tax credit and therefore UK's international competitiveness. Intellect will be pressing this point in our response to the Treasury.
The Consultation Document does hold some good news for industry however. Intellect is delighted that the Consultation focuses on two issues which the association has consistently campaigned on since the 2002 budget - namely the definition of R&D for tax purposes and how to increase the scope of qualifying expenditure to include advanced licensed software. Intellect also welcome the message that innovation can occur at any point in the R&D process so that innovation is not just regarded as a one-off big bang activity.
Tom Wills-Sandford, Director of Campaigns at Intellect said "As a result of working closely with the Revenue we believe that substantial improvements were made to the definition when the Inland Revenue issued their 'commentary' just before the last budget. Engineering R&D and Software R&D are now clearly established as eligible for the tax credit. Nevertheless we agree that the definition can be further improved so that industry is more certain that their R&D activities will qualify. In addition the industry has been pressing us for some time for the inclusion of advanced software as an allowable cost."
As well as responding to the consultation on behalf of industry Intellect is also conducting a survey of industry experiences of R&D tax credit claims. The survey will identify trends in successful and unsuccessful claims. The survey results will be made available in late summer.
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