Budget response from Grant Thornton technology group and
intellect
21 March 2007
Commenting on the Chancellor's Budget report, Neil Pamplin Tax
Director at Grant Thornton commented:
"Mr Brown's last budget would appear to be good news for the UK
technology sector but, as usual, the Chancellor could not resist
tinkering. There are some unpleasant surprises behind the
headlines.
The increase in R&D relief and in the numbers of companies
that will potentially qualify is to be applauded. It is unfortunate
however that the EU straightjacket will not allow this to be
extended to real cash credits.
We are also disappointed with the further erosion of Enterprise
Investment Scheme (EIS) and Venture Capital Trust (VCT) reliefs.
However, potentially the biggest cost will be felt with an increase
in small company corporation tax rate and restrictions to capital
allowances"
John Higgins, director general of Intellect, the UK trade
association for the IT, telecoms and electronics industries
commented:
“The proposed increase in R&D tax credit for large companies
is a baby step, rather than a giant stride: it is unlikely to have
any real impact on UK businesses. R&D is fundamental to the
success of UK’s knowledge economy, but we lag behind our
international competitors in terms of R&D spend. Although the
tax credit is just one factor for companies deciding upon R&D
projects, it can still act as a very real incentive. To use the tax
credit to really attract multinationals to undertake R&D in the
UK, the chancellor needed to increase it to at least at least
150%.”
Stephen Quest, tax partner at Grant Thornton commented:
Corporation Tax:
"Despite the headlines,
the overall rate of corporation tax has not been cut but
redistributed. The beleaguered manufacturing sector will be hit
hard by higher taxes to fund a tax reduction for service sector
companies resulting in no overall benefit to UK plc".
The new rates effectively kick-start the process of
modernisation of the capital allowance system, updating its
post-war connotations and placing the focus firmly on future
investment
Brown's corporation tax cut from 30p to 28p is welcome but late
and still not competitive enough. UK corporates are still operating
within a tax regime which is two and a half times the rate of
Ireland, three times more than the EU average and less competitive
than Israel and several Asian economies".