Clause 25
Finance Bill
3:00 pm
Kitty Ussher (Economic Secretary, HM Treasury; Burnley, Labour)
The hon. Gentleman gets to the point in his questions and I am grateful to him for that. Perhaps I can explain why these changes are being introduced, which will answer his questions. During the notification of changes announced in the 2006 and 2007 Budgets, the EU introduced a new framework for state aid for research, development and innovation. That has led to a longer notification process than might otherwise have occurred and the Commission has looked more at the fundamentals of the scheme and how they comply with the framework.
One of the requirements is that state aid should not be used to support firms that are in need of rescuing or restructuring, which this measure meets. Recent examples from elsewhere in Europe have seen illegal aids challenged and withdrawn. Therefore, it is obviously in our interest to make sure that we meet the requirements of the framework, which we are now seeking to do.
Tax relief is designed to encourage and support companies to invest in and undertake R and D. If a company is no longer a going concern any tax relief paid to it will be used to meet creditor liabilities rather than being used to invest in and undertake R and D. That is effectively British taxpayers’ money and should not happen. A company must make a claim for R and D relief in its annual tax return and in doing so must consider its eligibility, including the eligibility criteria around a going concern, in line with the scheme rules. If that places an extra burden on auditors, that is not necessarily a bad thing. I welcome my relationship with the ICAEW. Auditors need to exercise their duties with responsibility. We can keep talking about that perhaps.
I hope that that answers the hon. Gentleman’s questions.