Intellect, the UK’s hi-tech industry body, yesterday welcomed the Chancellor’s budget announcement that he was extending the SME research and development tax credit to cover firms with 500 employees. Until now it has been limited to those with up to 250 employees.
“This will help SMEs who originally fell out of this bracket to now benefit. Software companies will particularly benefit, as a large number currently fall in to this category,” said Tom Wills-Sandford, Deputy Director General of Intellect.
At the moment, businesses that grow over the headcount threshold face a significant loss in benefit, often at a time when the cash is still vital to their ability to grow.
Intellect believes that the changes will make a significant difference to innovative businesses in the UK. It hopes that the EU Commission will work swiftly with the Treasury so the country can start seeing the improvements sooner rather than later.
The announcement forms part of a package of measures that the Government hopes will push productivity growth in the UK.
Other announcements include:
- measures to reduce further burdens on business, including new commitments from HM Revenue and Customs (HMRC) to reduce the administrative burden of the tax system; introducing the Hampton Review’s principles into law and a review of how the experiences of large businesses can be taken into account in administering the tax system (the Hampton Review looked at regulatory inspections and enforcement);
- a comprehensive package of measures to enhance the UK’s position as a leading location for inward investment, developing an ambitious strategy for marketing the UK;
- promoting London as a world international centre for financial and business services, with a new strategy to be developed and implemented by a high level group representing the city’s key interests by summer 2006;
- establishing a new International Business Advisory Council comprising some of the world’s leading business people;
- a programme of organisational changes to UK Trade and Investment, with the aim of achieving a fundamental transformation of its effectiveness in marketing the UK;
- boosting access to finance to enable early-stage companies with real growth potential to bridge the equity gap and progress through to market, announcing a further £50 million in 2006-07 and £50 million in 2007-08 for the Enterprise Capital Funds scheme; and
- taking forward the Government’s strategy for tackling the long-term lack of supply and responsiveness of housing and property and introducing Real Estate Investment Trusts to create greater flexibility for investors.
According to Dr John Philpott, Chief Economist at the Chartered Institute of Personnel and Development, the measures are much the same as others the Chancellor has introduced since 1997.
“There is nothing to indicate that they will be more successful,” he said. “The accompanying Treasury document on the key drivers of productivity growth continues to overlook the importance of people management and development. Welcome new initiatives on work-related training, particularly those aimed at women, are relatively small in scale, while the final recommendations of the Leitch Review of skills are still awaited.”
The Leitch Review was set up to work out what skills mix the UK should have in 2020 in order to maximise its “economic growth, productivity and social justice.”
According to Patrick Walker, UK head of indirect tax, PricewaterhouseCoopers LLP, the Chancellor could have used his speech as an opportunity to provide greater clarity on VAT.
“Recent European Court of Justice rulings have provided greater clarity for UK and European businesses on how to manage their taxHowever, it is disappointing that the Chancellor of the Exchequer has not used today’s Budget as an opportunity to announce how such decisions will be implemented in practice, clarifying how businesses will be expected to comply with UK law.”
