UK Industry Bodies Divided Over R&D Tax Credit

by Jason Gorringe, Tax-News.com, London

23 August 2002

UK industry bodies are divided over the effectiveness of the government's attempts to encourage firms to invest more in research and development (R&D).

Speaking to the Electronic Engineering Times this week, a spokesman for the Engineering Employers' Federation stated that in the view of the EEF, the measures introduced in Chancellor Gordon Brown's 2000 budget are fundamentally flawed:

'I think that there is a fault with the design of the R&D tax credit,' he explained. 'It is volume-based, and only really rewards R&D that is taking place already. Because of this, we don't feel that it does enough to encourage future R&D.'

He continued: 'We wanted an incremental credit which would reward additional spending rather than spending which would probably take place anyway. We are sceptical as to how much extra spending it will actually reward.'

However, the Confederation of British Industry is far less critical of the measures, according to the industry newspaper.

Speaking on Wednesday, a CBI spokesman expressed the opinion that the R&D tax credit is workable: 'It is actually quite a helpful system. It shouldn't be seen as a thing to turn people off R&D.'

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