UK200Group considers the IMFs proposals to increase tax breaks to businesses
A member of the UK200Group of independent accountancy and law firms has commented on the IMF’s proposal to the UK to increase business tax breaks.
The IMF has told the Chancellor George Osborne that he has to do more to support UK innovation if the government wants to encourage growth and improve living standards.
Policymakers in the developed world need to encourage spending on R&D, which will pay for itself through a “large growth dividend”, the Fund has claimed.
It feels that well-designed tax breaks that encouraged private sector spending, together with public investment in basic research, were “critical” to increase productivity.
However, the IMF said tax breaks that were targeted directly at SMEs may be counterproductive in some cases.
Jonathan Russell, partner at UK200Group member firm ReesRussell, said:
“The IMF talking about tax breaks for R&D is very valid and that it should not just be restricted to small companies.
“It is great to support small businesses and the current tax assistance in this area in the UK is very good, but big corporates are much more agile and have the biggest resources to apply to R&D.
“Because large corporates are multinational they have the ability to move their R&D expenditure to whatever jurisdiction gives them the best tax breaks and think nothing of moving the necessary personnel around the world.
“The UK has a good track record in innovation, but a poor one in then retaining the benefits when production starts. Concepts such as the Patent Box tax reliefs are an excellent idea to ensure that having created the ideas the ongoing work remains in the UK.
“The UK can afford to give larger corporates the R&D and innovation incentives if they afterwards retain the profitable production afterwards.”