Reform of R&D tax credit to be unveiled

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The Independent Online

The Government will acknowledge businesses' criticism of its research and development (R&D) tax credit today by unveiling reform measures that could include extra cash to encourage innovation.

In a report published at its enterprise conference today, the Treasury will propose changes to the credit to improve its delivery and administration.

It acknowledged business complaints that the system was still bedevilled with problems five years after its launch.

A recent report by the CBI and EEF employers' groups found more than half of companies said the cost of claiming the credit was "unsatisfactory", and in some cases greater than the credit on offer.

In today's report, the Treasury says: "The Government recognises the need to make further improvements to the delivery and administration of the R&D tax credit."

Its plan includes the creation of dedicated R&D units within HM Revenue & Customs to ensure all claims by small- and medium-sized companies (SMEs) will be dealt with by specialist staff. The HMRC will also produce a statement of practice for SMEs detailing how their claims will be handled. It also says it will extend the credit to include payments to volunteers of clinical trials.

Gordon Brown will announce a review of the possibility of increasing the size of the tax credit, which would be published at the time of the next Budget.

The scheme currently offers 150 per cent credit for SMEs and 125 per cent for larger companies. An increase would delight the EEF, which used its submission before next week's pre-Budget report to call for an increase. The EEF said: "It would send a stronger signal to investment decision makers of the financial incentives being provided and help encourage particular forms of R&D such as in the climate change area."

So far SMEs have claimed £850m, while £530m has been granted under the smaller company scheme.