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SMEs missing out on Research and Development tax relief

Your business doesn’t have to be building rockets to fly to the moon to benefit from the government’s Research and Development tax relief! You might be
surprised at what qualifies, it could be what your company is doing right now…

Businesses unaware of Research and Development tax relief available

Here we look at the tax breaks available to small or medium-sized businesses (SMEs)* through the government’s Research and Development tax relief scheme.

Research and Development tax relief could prove substantial

As discussed in our blog ‘Top tax tips for the new tax year’, this HMRC scheme offers substantial tax relief for
businesses involved in making advancements in science or technology.

Introduced by the government in 2000 to encourage UK companies to invest in innovation, the tax relief available has grown significantly in recent years. Despite this, reports indicate that many eligible SMEs are not taking advantage of these breaks, potentially missing out on claiming back substantial sums of money for their businesses.

R&D tax credits enable companies that spend money on developing new systems, products and processes to receive a reduction in their Corporation Tax (CT) bill, a CT refund or a cash credit. This could be up to 130% additional
enhancement
of your R&D spend.

There is no minimum spend on a project to be eligible to make a claim, however claims can only be made on revenue expenditure (the general day-to-day running costs of the business), such as employee costs, materials, software and utilities specifically attributable to the R&D project.

From 1 April 2015, the overall relief increased from 225% to 230%, which in simple terms means that £10,000 spent on R&D produces an additional £2,600 of tax savings (based on current rates).

Innovation, improvement, development

To claim Research and Development tax relief, your company must meet two key criteria:

• Scientific or technological advancement
• Resolution of scientific or technological uncertainty.

This is a tricky area to explain but if your business is spending money on projects that aim to solve technical
uncertainty, such as solving problems of integration or performance, for example, then it probably has a strong case.

Save your company thousands

It’s definitely worth checking with your tax adviser or accountant to see if your business can claim R&D tax relief, as there are currently thousands of eligible companies not claiming the support. It could potentially save your company thousands!

Contact us and we’ll tell you if and how you can claim Research and Development tax relief.

* SME is defined as a company with less than 500 employees with either an annual turnover of less than €100
million or gross assets less than €86m.