R&D tax credits were introduced for SMEs in 2000 and for
large companies in 2002. At the same time as the SME tax credits
were brought in, the Government introduced a definition of R&D
for tax purposes, in Guidelines issued by the Secretary of State
for Trade and Industry.
However, as companies have become more familiar with the
procedure for claiming the tax credits, they have expressed
concerns that the definition of R&D does not provide them with
the degree of clarity and certainty they need to calculate which of
their activities will qualify for the credit and thus the likely
benefit.
Among the issues in the consultation is whether the definition
should be extended into new areas, such as design, to take account
of the full range of innovative activities carried on by
companies.
Also, there is a perceived need for greater certainty over what
constitutes 'consumable stores' for tax credit purposes (being
items that qualify for the credit which are stored and consumed as
part of the R&D process); the extension of the credits to
include expenditure on licences for advanced software (currently
excluded); and the definition of 'qualifying bodies' (to which
large companies can subcontract R&D).
The Government believes that the tax credit is set at a generous
rate and that the process of claiming the credit - via the
Corporation Tax return - is straightforward. It is important,
however, that companies are able to understand what activities they
can claim for.
The R&D consultation document can be downloaded from the
Treasury's site as a
62-page PDF.
Responses to the consultation can be sent by e-mail to: rdconsultation@hm-treasury.gov.uk
to arrive no later than 10 October 2003.
