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05/03/04

Intellect Urges Gordon Brown to Incentivise R&D

Break the 10% noise level or run the risk of R&D investment losses, warns trade association

Intellect, the trade association for the UK hi-tech industry, today urges the Chancellor Gordon Brown to encourage innovation and prove his commitment to creating the best incentive system for R&D in the world, by raising the effective tax credit rate above, what it calls, the 'noise level'.

Tom Wills-Sandford, the trade association's Director of Campaigns, recommendations that the Government takes rapid steps to incentivise R&D decision makers. He also stresses that the effective tax credit rate, which is currently between 3.75% and 5%, must be raised to 10%. This is a figure which Intellect believes will be sufficient to provide British companies and multi nationals with the incentives they need to invest in R&D in the UK.

Specifically, Intellect asks the Chancellor for reassurance that -

• The effective R&D tax credits rate will be increased to 10%
• Allowable costs will be widened to include software
• The definition of R&D will be clarified and confirmed

Commenting, Wills-Sandford says, "The Chancellor must listen to the warnings coming from industry which say that the UK is loosing its edge as a location for R&D investment. Unfilled commitments to improve the incentive system will not help the UK. Action is what is needed if the UK hi-tech industry is to be able to remain competitive within the knowledge driven economy."

Intellect also calls on the Chancellor to make permanent the 100% ICT allowance for UK SMEs.

"The Government must continue to provide ICT incentives to UK SMEs", says Wills-Sandford. "Technology is a critical enabler of increased productivity, efficiency and innovation. Any drop in the 100% ICT allowance afforded to SMEs will bring a reduction in the deployment of technology, and with it a reduction in productivity and competitiveness of the UK economy."

In addition Intellect calls on the Chancellor to introduce tax breaks for UK firms investing in training, and specifically ICT training.

"The Individual Learning Accounts (ILAs) have failed to encourage people to invest in their development through learning", comments Wills-Sandford. "There is currently a severe lack of incentive for businesses to invest in training, and as a result many firms are focused on short term gains rather than long term investment. A fiscal incentive through tax breaks would create an environment to encourage businesses to invest in the training of their workforce, something which would benefit the entire UK economy and enable the Government to meet its productivity challenge."

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