Schedule 3
Finance (No. 2) Bill
12:45 pm
Julia Goldsworthy (Shadow Chief Secretary To the Treasury, Treasury; Falmouth and Camborne, Liberal Democrat)
In their own terms, the new clause and schedule are rational and attempt to simplify the process by aligning the claims processes and time limits for R and D tax reliefs with those of enhanced deductions. However, I should like to follow the points made by the hon. Member for Fareham by considering the impact of the changes in tax credits on small businesses and the knock-on impact that they may have on them again. If all claims need to be made in company tax returns within 12 months of the filing date, what will be the impact of these changes on small businesses? Given that that is already a difficult administrative burden for them, reducing the time scale will be an additional difficulty.
There is still an issue with small businesses having to pay up front and claiming back tax credits. I should like to quote one conclusion from the report by the Manchester and Nottingham business schools, commissioned by the Institute of Chartered Accountants in England and Wales, which says:
“R&D tax credits on offer in the UK are similar to some of the best schemes offered around the world. The incentives are relatively more generous to smaller firms. The application process, however, diminishes the effectiveness of the policy and this is especially so for smaller firms and firms with small R & D programmes. In some cases the costs of preparing and administering claims prevents firms from taking advantage of the incentives.”
Given those conclusions, I wonder whether the Government really consider this to be an efficient mechanism for supporting small businesses in particular.