Above the line tax credit for automakers in Britain from 2013: Boost for vehicle research and development

2013 will see an ‘above the line’ tax credit being introduced by the UK government in a bid to encourage spending by large companies on research and development. Functioning like a grant, the benefit is payable even in case a company doesn’t have tax liabilities. Automakers too had been seeking such changes from the government. The currently announced benefits will add to investments, and simultaneously create new jobs.

Chief executive of the Society of Motor Manufacturers and Traders, Paul Everitt had this to say. “Reform of the R&D tax credit system propels the UK into a new league of global competitiveness, sending a strong signal to international investors.” “The UK is already a centre for innovation with advanced engineering and low-carbon expertise attracting major corporations to invest in the UK. This reform will enhance the UK’s investment appeal, create high-value jobs and drive economic growth.” He further added, “It will be a tremendous boost to the UK motor industry.”

At present R&D spending by large companies in Britain is rewarded in the form of incentives, i.e., relief tax payable on profits. Despite the safeguard, companies do lose money when developing new products. Tax benefits usually lose their charm back in home countries for many companies.

Germany’s Volkswagen owned Bentley, and India’s Tata Motors owned Jaguar Land Rover spend a lot on R&D of vehicles in Britain. However, BMW-owned Mini, General Motors’ UK Vauxhall, and Rolls-Roycedo not have the same approach. Bentley Motors had this to say. “As one of the UK’s most significant investors in R&D, Bentley will see tangible benefits from the new scheme.” “It will also help promote future investment and ensure that the UK is recognized as [a] globally competitive location for R&D in the automotive sector.” Automakers in Britain have been calling for a tax change for long since a majority of them are multinational groups and could engage in R&D of vehicles back in home countries. The auto industry has increased spending on R&D for low carbon cars vehicles that are emissions compliant globally.