UK Needs Better R&D Tax Breaks Says IT Body

by Robert Lee, Tax-News.com, London

10 December 2003

The UK government must offer better tax incentives to encourage and cultivate research and development activity or risk eroding the country’s competitiveness through a ‘brain drain’ as innovative firms seek more favorable conditions offshore, according to UK-based IT trade body Intellect.

"The effective rate for undertaking R&D needs to increase significantly,” comments Tom Wills-Sandford, Intellect’s Campaigns Director ahead of the Chancellor’s pre-Budget speech today.

He notes: “For large companies the effective reward they get for investing in R&D in the UK is between 3.75% and 5% of the actual cost of the R&D. Government must understand that this figure is drastically below the 'noise level'.”

"Until the effective rate moves closer to the international average of 10 per cent, there will never be sufficient incentive for UK based technology companies to grow their share of world wide R&D,” Mr Wills-Sandford warns. “In addition their ability to produce the innovative products and services that they need to compete in the global economy will diminish and the UK economy will suffer as a result."

"We urge Government to ensure that the definition of R&D is clearer and easier to understand, providing much needed certainty to R&D decision makers so that they know that an R&D project will qualify before the work is undertaken.”

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