"Dark ages" in UK for R&D tax policy

Changes to the UK's tax credit system have been branded as "taking the R&D scheme back to the dark ages," according to David O'Keefe, R&D tax  partner at international management consulting and accountancy giant  KPMG. The government's attempts to promote the UK as a global center for  pharmaceutical development have been welcomed by industry groups, such  as the Association of the British Pharmaceutical Industry and the  BioIndustry Alliance (Marketletters passim). However, Mr O'Keefe was  scathing about Her Majesty's Revenue & Customs Service, which has  implemented a new interpretation of what constitutes investment for  tax credit purposes.

Any activity deemed to be associated with the production of goods and  services is no longer considered eligible by the HMRC under the new  system. Mr O'Keefe said: "they are claiming it's not a change in policy  but it's patently not true. It's a very significant move and has not  been thought through."

He told the Daily Telegraph that "most, if not all, the  manufacturing-type businesses where there's a genuine R&D going will  have pre-production trials. [The] HMRC says there's something you could  sell at the end of it," and therefore rejecting tax credit claims. The  Confederation of British Industry said that the 2004 guidelines drawn  up by the government have reduced the cost of R&D investment in the  UK.