Chancellor's R&D tax incentive not aggressive enough to win investment, warn suppliers

The government's commitment to improving the research and development tax credits system is welcome, but it needs to increase the...

The government's commitment to improving the research and development tax credits system is welcome, but it needs to increase the reward for investing in R&D, IT supplier body Intellect has warned.

In last week's pre-Budget report, the chancellor Gordon Brown announced that R&D tax incentives would be widened and further consultation on the definition of R&D would be carried out to ensure the credits remain competitive internationally.

Intellect welcomed the announcements but expressed disappointment at the promised level of relief.

Intellect said an increase from 4% to about 4.5% was not aggressive enough and would fail to provide UK firms and multinationals with an incentive to invest in the UK as a R&D base.

Tom Wills-Sandford, campaigns director at Intellect, said, "If British high-tech businesses are to be best placed to develop and produce the innovative products and services they need to compete in the global economy, then R&D tax credits must move closer to the industry's goal of an effective rate of 10%."

Russell Hampshire, KPMG tax partner specialising in research and development, said, "Large technology companies are still going to feel that the level of tax relief is too small to make an impact on their decision making on R&D."

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