R&D Tax Credit Exposure Draft Legislation Released

The exposure draft legislation for the proposed new R&D Tax Credit has been released. While the news is not all bad, the new R&D Tax Credit proposed by the Treasury seeks to legislate a considerable narrower definition of R&D coupled with augmented feedstock provisions that would combine to remove any real incentive effect at the critical phases of all R&D projects - the times where decisions are made as to how much expenditure to commit to a project. Along with this minimised incentive effect, the new legislation introduces a slew of new concepts and requirements that add a huge amount of complexity to the program, couching it in language that is confusing and not relevant to technical personnel and again dropping the responsibility for the claim squarely in the lap of the company's taxation team.

In short, it is an incentive designed to encourage companies to do R&D outside their normal operating environments and only reward failures which can only be determined after the fact. It is not interested in assisting companies that seek successful R&D outcomes in commercially-driven environments.

The Treasury has given interested parties until 5 February 2010 for responses to be submitted. Further information on the proposed changes can be found on the MJA website. And as always, we are happy to discuss any questions and concerns that you may have. We will keep you updated regularly on progress.

In the meantime, we wish you all the best for the Christmas season and for a very successful 2010.