Further supplementary memorandum submitted
R&D TAX CREDIT
Introduction of the new R&D tax credit against
corporation tax was announced in the 2002 budget available to
all companies not already qualifying for the SME R&D tax credit,
payable at a 25% headline rate.
A Powergen does not currently pay corporation
tax, it does not currently benefit from the credit. Powergen expects
it to be of some modest benefit, when Powergen begins paying corporation
tax in the future.
As the tax credit will not act as an incentive
to those companies who have no taxable profits, the incentive
it provides in these cases is less effective than some form of
cash payment to support R&D.
The credit is allowed for research and for development
of an experimental nature only. This definition of development
is quite restrictive and will significantly limit the R&D
expenditure to which the R&D credit applies in Powergen's
a cash payment would provide a greater
incentive than a tax credit; and
a broadening of the definition of
development would enhance incentives to carry out development
work of an applied rather than purely experimental nature.