News
Issue date - 15 August 2006
Source - www.thenorthernecho.co.uk/
Title - Nissan's tax-back deal could be a breakthrough for British industry
ON the face of it, a tussle between Nissan's UK division and the taxman should not galvanise the rest of British industry.
But the decision last week to allow Nissan to claim tax credits on the part of its design investment made in this country could be a breakthrough that will allow many more businesses to develop their products in Britain rather than overseas.
Major sectors of the UK design industry could be sitting on a pot of gold in unclaimed tax relief -money that is being left untouched largely due to ignorance over what designers can claim.
Industry executives said the agreement between Nissan Design Europe and Revenue and Customs shed light on what had been a legal grey area over where the research and development phase ends and the design process begins.
David Godber, director of Nissan Design Europe, has secured the car manufacturer's design studio 'hundreds of thousands of pounds a year' in tax relief, purely for its design endeavours.
Godber said the development was a tangible demonstration of how the design process can be eligible for research and development support.
Prior to Nissan's success, the process remained somewhat complex, and was seldom approached by designers.
Companies have long blamed the UK tax culture for the reason why business spends less on research than competing economies in Germany, France and even Sweden.
Although firms have been able to claim tax rebates on research and development costs, the actual design process has been excluded.
Following last week's agreement, Nissan UK can claim tax credits on the creation of prototypes - a key part of the car creation process - provided the company can show that these vehicles advance scientific knowledge or technology in some meaningful way.
A report commissioned by the Treasury last year urged the Government to offer greater tax incentives to stimulate research and development in this country.
Nissan could have chosen Germany as the base for its European research and development operation. After all, General Motors switched Vauxhall's facilities to the Opel design centre in Germany more than 20 years ago. Ford also conducts a lot of research work in mainland Europe.
Nissan selected Britain partly because of the success it enjoyed at its manufacturing facility in Sunderland and partly because British design flair continues to be the envy of the world.
Several Nissan cars have been part-developed here as a result, beginning with the 1991 Micra -the first Japanese car to win the European Car of the Year award.
The Design Council, which is running a campaign to help small companies claim tax relief on design and prototyping, welcomed the decision.
Chief executive David Kester said: 'There has been no argument about the need to stimulate innovation through tax credits; 60 per cent of companies have not launched a new product or service in the last three years.
'This decision has broadened what development costs are and that should enable more companies to be eligible.'
For every £100 spent on qualifying design, a large company is entitled to £125 of tax-free income. For a small or med- ium company, that rises to £150 for every £100 spent.
While there are no figures estimating how much design-related tax relief is going unclaimed, a survey by Deloitte this year found that 55 per cent of potentially eligible small and medium sized businesses had not submitted a claim for research and development tax credits.
And about 40 per cent of companies said the most difficult aspect of making a claim was determining what activities were eligible.
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