Income Tax and Research Expenditure

Part of the debate – in the House of Commons on 25th April 1944.

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For taxation purposes research expenditure is divided between that incurred by a central body on behalf of a section of industry and that carried out by a trading concern in its own works. It has been the practice of the Inland Revenue, since the last war, to allow as a deduction, in computing profits, all annual payments made by a trading concern to a central research body approved by the Department of Scientific and Industrial Research, though this allowance did not extend to a particular payment earmarked for a special capital project. As regards a trader's own research, the general principle has been to distinguish between expenditure of a revenue character and capital expenditure, allowing the former and disallowing the latter, though in practice there has been no undue insistence on this distinction.