Are you researching and developing without realising it?
We have now carried out R&D tax credit claims for seven clients, obtaining in excess of quarter of a million pounds in tax repayments. But new figures have shown that companies are missing out on R&D tax credits because they’re not aware that they might be eligible. In fact, the Treasury's most recent figures show that just 10,000 SMEs claimed R&D tax relief for the year 2011-12.
Under the European state aid scheme, small businesses (classified as those with up to 500 employees) can benefit from tax relief of 225% on ‘qualifying projects’. To qualify, firms have to show what scientific or technological advance they want to achieve. There’s a common misperception that the tax credits are available only to those doing research projects, rather than development. But it’s not necessary to have someone in a white coat carrying out experiments. For example, a construction firm looking to lower costs and meet demands around health, safety and sustainability might take a new engineering approach and this might well qualify for the tax credit. Other projects that may qualify include the development of new, bespoke software, whether carried out in-house or subcontracted to another company.
In a recent survey, only 15% of the 750 SME’s knew about R&D tax credits. Tax incentive schemes also appeared to have a low profile, with only 8% knowing about the Seed Enterprise Investment Scheme and 4% aware of the Patent Box. The 15% figure in respect of R&D tax credits is alarmingly low, given that there must be very many companies out there carrying out qualifying projects. If you think that you may be carrying out qualifying activities, or if you know of another company that may be missing out in this respect, be sure to let us know