U.K. Auto Industry Hails R&D Tax-Credit Revision

The Society of Motor Manufacturers and Traders celebrates as the U.K. government announces a change to the research-and-development tax-credit system, sealing a victory for the automotive and broader manufacturing sector.

Chancellor of the Exchequer George Osbourne’s announcement comes after a campaign by the SMMT and the Engineering Employers Federation (EEF) to have the credit process revised.

Society of Motor Manufacturers and Traders CEO Paul Everitt.

A government transcript of Osbourne’s Autumn Statement – a sort of mini-budget – shows him saying he will introduce an “above-the-line” tax credit in 2013 to encourage R&D activity by larger companies.

“The government will consult on the detail at Budget 2012 and will ensure that (small- and medium-size enterprises’) R&D incentives are not reduced as a result of this change,” the statement says.

SMMT says the revision will help the U.K. automotive industry capitalize on its global reach, generating more R&D investment, safeguarding jobs and boosting the country’s status as a prime location to base high-skill operations.

“Reform of the R&D tax credit system propels the U.K. into a new league of global competitiveness, sending a strong signal to international investors,” SMMT CEO Paul Everitt says in a statement.

“The U.K. is already a center for innovation with advanced engineering and low-carbon expertise attracting major corporations to invest in the U.K.; this reform will enhance the UK’s investment appeal, create high-value jobs and drive economic growth.”

The EEF says the key benefits of moving to an above the-line credit are the creation of a simpler system; strengthening the link between the R&D tax-credit incentive and the parts of companies where investment decisions on R&D are made; and increasing certainty about the timing of the benefit of the R&D credit by decoupling it from a company’s tax profile.

In another boost for vehicle sales, Osbourne says January's planned 3-pence-per-liter ($0.18 a gallon) increase in fuel duty will be postponed until August, and a second hike of five pence a liter ($0.30 a gallon) that was planned for August will not take place.

“An average family will save around £144 ($225) on filling the average family car by the end of next year,” Osbourne says.