R&D credits system 'needs better marketing'

Companies have urged the government to avoid wholesale changes to the UK’s research and development (R&D) set-up, and to instead make only small alterations including a revamp of the promotional material.

As part of ministers’ aim to establish a competitive corporate tax system, the Treasury is consulting on how the R&D tax credits system provides support for business innovation, and on the feasibility of a ‘patent box’, a 10% corporation tax rate on profits from patents, which has been scheduled for introduction in April 2013.

A survey by Chantrey Vellacott DFK has established a ‘very clear picture’ of firms’ views of the current arrangements, according to the accountancy group, whose partner Steve Levine praised the ‘thoroughly laudable and worthwhile incentive to help companies to develop new and cutting-edge products’.

However, he added that the proposed changes were ‘all just wide of the mark’.

‘Bizarrely, one of the main reasons… is the imagery which was used on the marketing when the [R&D tax credit] system was launched [ten years ago], as it included a picture of a man with a test tube – and all this served to do was make it seem irrelevant to non-scientific industry,’ said Mr Levine.

‘I think it is fair to say that barrier has remained in the mindset of many companies right through the life of R&D tax credits.’

Only minor changes are necessary for the system to provide a major boon for industry, claimed Mr Levine, who highlighted as a problem the matter of the credits being allowed for after tax.

He said, ‘We know from talking to companies that in some bigger organisations, staff members are remunerated based on their results before tax. That removes any incentive whatsoever for employees to go down the R&D tax credits path.
 
‘Similarly, some departments are judged on cost savings, so again the tax credits will not be judged as an incentive for people who run these sections of the companies.

‘If the government could iron those crinkles out of the system then we are certain it could be a bigger help to British industry.’

Categories: News , R&D , Companies