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)
They were not illegitimately claiming the allowance. We said that a company could round up to 100 per cent. once it got to 80 per cent.it did not have to go beyond that. This is not a question of abuse but of what was allowed in the legislation, which was arrived at with the support of the Liberal Democrats after extensive consultation on where we should strike the balance between simplicity and fairness.
To draw in those companies spending less than 20 per cent., we had to consider how much more the relief would cost the Government, but the hon. Member for Arundel and South Downs wants both ends. He wants companies that spend up to 80 per cent. to be able to claim the 100 per cent., but he also wants changes at the lower end, which would be dropped much lower. Our view is that that cannot be delivered. I can understand that companies would still wish to retain the 80 per cent. rule, as that gives them tax credit beyond what they spend, but it is clear that the simplest and fairest approach is the one that we have adopted. Although the rules are slightly more complicated than they were originally, they are fairer to the majority of taxpayers. As the R and D tax credit develops, we shall continually monitor whether it delivers the intended outcomes.