Mr. Gerard Brady:

It is a major issue for us. We believe the research and development tax credit is very important at all levels but we see that many of our member companies that do research and development and should qualify for the credit are not using it. The reason they are not using it, and therefore are not doing more research and development, is that it is too difficult for an SME to use the scheme. We hear time and again that the value got from the credit by a company that does a small amount of research and development and wants to scale up might be less than what would be spent claiming it if accountants and others had to be hired. Therefore, there is a genuine difficulty in trying to get firms that really should be using it and would benefit from it, particularly SMEs, to use it more. That is the main challenge.

The solution is quite obvious from our perspective. The OECD made recommendations on this in its SME review a number of years ago. In the UK, including Northern Ireland, there is a scheme that members of ours use and believe works very well. I am referring to a separate research and development tax credit for SMEs. We have campaigned for such a credit for some years. The scheme has pro formaforms in respect of its administration that give companies greater comfort that they will not be audited on the back of the credit when they first use it. This is a major fear of many small companies. The credit effectively costs a lot less to use for small firms. There is a huge amount that could be done in this regard but ultimately we believe a separate scheme is needed. We went through this in terms of state aid – in respect of budget 19, I believe. It was announced that there would be changes but that has fallen by the wayside in the years since. We have not seen it come through. A separate scheme is possible in other European countries and would work really well here.