Ernst & Young Budget reaction: Another chapter in the R&D saga
Frank Buffone, head of R&D tax incentives at Ernst & Young in the UK & Ireland:
“The Chancellor has written another chapter to the R&D saga, bringing us one stage closer to the ‘above the line credit’. The announcement of a minimum tax credit rate of 9.1% before tax still falls short of other countries such as Ireland and France. However combined with the surprise extra 1 percentage point cut in the corporate tax rate, the Chancellor will be betting on the overall package being an attractive proposition.
“The ‘above the line’ system will allow R&D departments to recognise the benefit of the incentive in their own budgets rather than as a reduction in tax for the company as a whole. This will encourage greater investment in R&D and will mean companies more readily take it into account in deciding where to locate their R&D activities.
“When combined with the preferential 10% tax regime for patents this represents a significant step forward for innovation in the UK, and the Chancellor’s aspiration of making the UK tax system once again an asset.
“Today’s announcement of a payable tax credit will significantly increase the attractiveness of the regime, equating the incentive to that of a direct grant. Surprisingly at a rate of 9.1% companies currently paying tax would actually lose out compared to the existing regime and this may be why the Chancellor has set this as a minimum.
“This will benefit all companies actively participating in innovation.”