Schedule 12 - Tax relief for expenditure on research and development

Part of Finance Bill – in a Public Bill Committee at 6:15 pm on 21st May 2002.

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Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury) 6:15 pm, 21st May 2002

Certainly. My hon. Friend raises an important point about how the tax credit operates. It will encourage research and development in the United Kingdom, particularly in industries that large multinational companies may be financing from outside the UK. My hon. Friend's example was of the tyre industry being financed from outside the UK when its R and D occurred here. Such an industry would qualify for tax credit.

The hon. Member for Arundel and South Downs made a slightly different point. He wanted to ensure that companies did not get double credit—from the United States and from the United Kingdom—for the same R and D. My response was that the operation of tax treaties, and the rules for calculating tax, would ensure that that did not happen. A multinational that accessed R and D tax credit in another part of the world could not access R and D tax credit in the UK—even if it tried to get it for different R and D—because that would make for complicated rules on distinguishing where research happened. We want our tax treaties and tax system to operate normally by ensuring that there is no double relief. I hope that I have reassured the hon. Gentleman that we are quietly confident that our rules will prevent behaviour that could cost the Exchequer money.