CBI says government must retain R&D tax credit

Posted on 4 Feb 2009 by The Manufacturer

The Confederation of British Industry (CBI) is pressing government to uphold the ‘much improved and user-friendly’ research and development tax credit, after a survey completed by the CBI with other trade bodies attested to its worth.

Half of businesses say the credit, which allows firms to deduct up to 175 per cent of their R&D expenditure from their tax bill, directly helps them keep R&D in the UK. Over a third say they have increased investment on R&D because of the credit.

Overall, businesses rate every aspect of the tax credit more favourably than they did three years ago, the survey found.

However, one negative is that the cost of making claims remains too high, firms said.

Richard Lambert, the CBI’s Director-General, said: “As our economy seeks to re-balance over the months ahead, the government must recognise the value of the R&D tax credit and commit to retaining it and encouraging more firms to invest in research and development.

“It should also go further by building on its success; extending the rate and range of credit, enabling more companies to apply and covering more of their associated overheads.

“All of our major competitor countries have and value such a scheme. Losing the tax credit now would be a real blow and could seriously affect Britain’s overall R&D investment. The UK currently has the highest proportion of business R&D financed from abroad of any OECD country.”

The survey was conducted in conjunction with the Society of British Aerospace companies (SBAC), the Association of Independent Research & Technology Organisations (AIRTO) and Intellect – trade association for the UK technology industry.

Ian Godden from SBAC said: “The R&D tax credit has proven to be a significant assistance scheme to businesses in aerospace manufacturing and, if this vibrant industry is to deliver for Britain in the future should be continued.”

Meanwhile, Tom Wills-Sandford of Intellect said the technology sector has been “delighted at the change in culture” within revenues and customs and applauded the department on the scheme thus far.