Schedule 31 - Tax relief for expenditure on research and development
Finance Bill
7:30 pm
Ms Dawn Primarolo (Paymaster General, HM Treasury; Bristol South, Labour)
I do not agree with the hon. Gentleman's amendment, and I shall ask my hon. Friends to oppose it if he presses it to a vote this evening. He mentioned a rough and ready formula, but he well knows that it is not unreasonable for the Government to continue to ensure that relief goes where it was intended to go.
Under the present laws, as the hon. Gentleman rightly says, staff expenditure of less than 20 per cent. does not count and the company is not able to get the credit. At one end, that has proved to be unfair to the companies that are excluded and denied the opportunity to grow and to dedicate more and more of their expenditure to R and D. At the other end, once companies spend 80 per cent., they simply say that it was 100 per cent. That was allowed to simplify the rules, and it goes to the nub of our earlier discussion.
Something may be easy to operate, but does it deliver the objective? We intended the rule as a simplification. However, with practical experience of the R and D tax credit and the consultation that took place during the past year, it became clear that some small companies in particular were missing out completely because they simply were not spending enough at that time. It is right to change that.