Schedule 12 - Tax relief for expenditure on research and development

Part of Finance Bill – in a Public Bill Committee at 5:45 pm on 21st May 2002.

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Photo of Edward Davey Edward Davey Shadow Chief Secretary to the Treasury, Shadow Minister (Olympics and London), Liberal Democrat Spokesperson (Olympics and London), Liberal Democrat Spokesperson (Chief Secretary to the Treasury) 5:45 pm, 21st May 2002

The principle behind the amendment needs applauding. If the Minister is not going to accept it, I hope that she can explain how she envisages companies growing and developing from one tax credit to the next.

The Minister was gracious to the Committee in the previous debate and explained the background and how the credits would work. That was a helpful reminder but I am still not clear whether, if a company grows over the period of the R and D investment and moves from one definition to the next, it will suffer penalties. How will the transition in its growth be managed within the tax system? That is an important issue. We should be grateful to the hon. Member for Arundel and South Downs for tabling the amendment because, if the R and D is successful, the company will grow. The Minister might argue that if the company is successful, the tax credit should be capped because the earnings that result from its growth will mean that it no longer needs the subsidy.

Investors will be putting in risk capital and expecting a certain return. Has the Minister analysed the relation between the two credits? Will she be able to reassure investors that their expected returns will not suddenly diminish because of the complex interrelations in the system?