Select Committee on Science and Technology Appendices to the Minutes of Evidence


APPENDIX 57

Further supplementary memorandum submitted by Powergen

THE NEW 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 case.

  In summary:

    —  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.


 
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