James Dyson

Future of R&D Tax Credits

Posted on September 1, 2010 by Tax N2K 0

I was asked by a client yesterday whether I thought the UK R&D tax credit system would be around for the foreseeable future?

I answered “Yes”. Here’s a summary of my current thinking:

  • James Dyson‘s Ingenious Britain Report, as commissioned pre-election by the Conservative party into re-energising the British economy, gave the UK R&D tax credit system a whole-hearted thumbs-up – in fact, he recommended that this valuable tax incentive should be further enhanced for innovative high tech UK small companies;
  • The Tories pledged to push forward with a planned review of the taxation of intellectual property this Autumn. The Coalition government is keen to make the UK tax regime one of the most competitive in the G20 and to do so demands a well structured and favourable tax framework for intellectual property – otherwise big multi-nationals look to move their prized assets i.e. their intellectual property (IP) to a more favourable tax jurisdiction and worse, our home-grown talent (- export value – jobs) can be tempted to follow suit;
  • The Autumn review of IP tax is also expected press forward on plans to introduce a new patent box to tax income derived from intellectual property at a lower corporation tax rate – a tax incentive already enjoyed by our Dutch neighbours for example, so it is good to see that UK resident companies should enjoy similar tax benefits in the near future;
  • Generally there appears to be a growing understanding and acceptance (echoed from all political parties: from Alistair Darling to George Osborne to Vince Cable) that the most viable opportunity for rebuilding a long-term sustainable UK economy is to invest in building first class hi-tech innovative and intellectual property rich companies that can export their valuable know-how globally. A recent Nesta report on Rebalancing the UK economy is well worth a read in reaffirming this perspective. In essence: we don’t necessarily have to make the stuff but we can develop the ideas, know-how and proprietary IP for global manufacturers, distributors and retailers to license and sell!

On the negative side:

  • there was a momentary concern in the final stages of the election that the Conservatives would drop the R&D tax regime if elected when they pledged to reduce the headline corporation tax rate and “simplify the corporation tax regime” – could this have meant the death of the R&D tax scheme and other valuable incentives such as capital allowances? (although this proved not to be the case in the Emergency Budget).
  • The Coalition government also put a stop to proposals to introduce a video games tax relief which appears at odds with a perceived overarching aim to focus entrepreneurs on building IP rich digital and technology businesses.

So there have been some wobbles but fingers crossed these are isolated lapses (as a side-note I really hope the gaming tax relief proposals get back on the cards very soon).

What are your thoughts on the future of UK Research and Development tax credits?

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R&D tax credits get thumbs up in Tory Technology Manifesto

Posted on March 17, 2010 by Tax N2K 1

Hot on the heels of the Ingenious Britain report by James Dyson, the Conservatives have released a disappointingly limp Technology Manifesto. Although its key aims build on many of the promising ideas set out in the Tory commissioned Dyson report – in aiming to position the UK at the forefront of global technology and science based exports – it unfortunately lacks any great detail (I’m all for brevity but 11 pages?!) plus it appears to veer off track in many parts (not sure how publishing data like….public sector salaries over say £150k etc is going to put us at the leading edge of global tech commerce? Worthy aim, wrong manifesto).

To its credit it promises to implement many of the proposals set out by James Dyson as soon as possible which sounds promising plus it singles out R&D tax credits as being retained and simplified – although unfortunately no mention of increasing the tax relief to 200% as Dyson recommended (although this is still a vast improvement given the rumour that the Conservatives were, up until very recently, considering abolishing research and development (R&D) tax credits altogether in an effort to simplify the UK corporation tax regime.

There is also talk of implementing a superfast broadband network of 100mbps that is some 50 times faster than Labour’s proposed super broadband network but the detail on exactly when and how this will be achieved is also notable by its absence.

Overall, I am delighted to see that the Conservative party is choosing to focus its efforts on pushing the boundaries in making the UK a leading global technology and science friendly location to do business, we could just do with a little more detail – as we’re not the only ones with this lofty ambition.

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