R&D tax relief
The Government will consult business on a long term approach to the taxation of R&D based on the proposals contained in James Dyson's report, titled 'Ingenious Britain' issued in March 2010. This report states that R&D tax credits should be refocused on high tech companies, small businesses and new start-ups in order to stimulate a new wave of technology.
Who will be affected?
Companies which pay UK corporation tax and undertake eligible R&D activities have been eligible for additional deductions for a number of years now. It is unclear which individual companies will be affected.
The Chancellor stated that the consultation would be undertaken in Autumn this year.
James Dyson's report states that R&D tax credits can be an excellent way to support R&D. It recommends that the relief for 'small' companies should be enhanced, but that the overall cost of the regime need not increase. This suggests that the amount of relief payable to larger companies may be restricted in some way, to fund an increase in the SME relief.
Whilst any enhancement to the SME regime would be welcome, any restrictions to the large company regime will reduce the competiveness of the UK as a place to carry out R&D, particularly when many countries, notably France, are increasing the reliefs available.
It is essential the Government looks at the way reliefs are made available in
other countries and adopts a best of breed in terms of general value and
effectiveness. Deloitte will work closely with interested companies and relevant
industry bodies to put forward relevant views.