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Osborne to raise R&D tax credits to 200%

George Osborne

Published: 24th March 2011.

[Obtained from]

Chancellor George Osborne has pledged to increase the R&D tax credit to 200 per cent from April, and then to 225 per cent the following year.

That's up from 175 per cent, and is in line with UK development association TIGA's recommendations proposed earlier this month and backed by Labour MP Stephen Timms.

This means that for every pound that a small and medium enterprise spends of qualifying expenditure it would get two pounds of tax deduction, which it can use to reduce its corporation tax.

Chancellor George Osborne had met with senior industry figures in February to discuss wide-ranging issues including finance, skills, broadband, tax, distribution and copyright - raising hopes for new collaboration and government assistance.

The meeting prompted UK developer body TIGA to once again renew its campaign for tax relief, something it has continued to push for despite previous broken promises.

Osborne also announced that there are plans to improve the intellectual property regime in the digital and creative industries, with more details to follow.

TIGA CEO Richard Wilson welcomed the changes to the R&D tax credit system, telling that they would lead to around a 65-70 per cent increase in value for games companies, representing approximately £7 million of benefits in real terms.

"We're delighted with the changes," he said directly after the Budget statement was delivered. "It's something we've been campaigning for, for a long time. We've released three reports and had numerous meetings with the Treasury over the past 12 months.

"However, we are disappointed that Games Tax Relief isn't being resurrected," he added, noting that TIGA would continue to lobby for that Relief to be implemented in the future.

UKIE also expressed its disappointment at the lack of industry specific tax breaks, but welcomed the increase in R&D credit, as well as the doubling of University Technical Colleges and the easing of access to finance for small businesses.

A further 2 per cent cut in corporation tax was also applauded, as were the introduction of 40,000 new apprenticeship places and special "enterprise zones" which will offer high-speed internet access and local rate relief.

"UKIE welcomes the government's focus on growth, particularly around supporting small businesses and encouraging external investment in the UK," said UKIE director general Michael Rawlinson.

"Whilst it is disappointing not to have industry specific tax breaks introduced, we were delighted to see increases to the R&D tax credit rate to 200 per cent from April, and then to 225 per cent in 2012.

"UKIE identified changes to the R&D system as a key area in its pre-budget submission to Treasury and shall be concentrating on making sure that the industry makes full use of these tax credits through practical support in the coming months. A further announcement on this will be made shortly.

"UKIE also welcomes the government's acknowledgement of the creative industries in the Growth Review that accompanied this budget. Of particular interest is reference to the Livingstone Hope review of skills in the video games industry, as UKIE is leading on delivery of the recommendations from this report, to ensure that the industry has the skilled workforce it needs to succeed in the future."

Matt Martin

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