UK SMEs are missing out on millions of pounds of tax credits by not claiming for new product research and development costs.
SMEs are failing to maximise their tax efficiency which, in turn, impacts on their ability to finance new product development programmes.
There has been a steady increase in R&D tax relief claims since its introduction, but there is still a chronic lack of awareness amongst the UK’s SME base. The result is that hundreds of millions of pounds of R&D tax credits are going unclaimed which could make a significant impact to the ability of an SME to fund new product development.
Any company or organisation can claim R&D relief whether it is making profits or losses, with no upper limit on the amount of the claim. SMEs are capable of deducting up to 230% of R&D costs, which could include specific costs such as staff costs, consumable materials, subcontracted costs, power, water, fuel and computer software that is used directly in carrying out R&D.
Many SMEs are involved in R&D and the HMRC definition by no means restricts the ability to claim to just high tech or pharmaceutical industries. Many SMEs do not realise that they have eligible projects or worry that the process is too onerous and costly. R&D tax credit advice forms part of our specialist business support service, which covers all aspects of this taxation advice including securing funding.
The primary barrier to claims is that many SMEs and advisers wrongly believe that R&D relief can only be claimed on new products. R&D tax credits are not only confined to light bulb eureka moments; product improvements, new ranges and new production processes can also be eligible.
Furthermore, identifying costs associated with R&D activity is often seen as a laborious and minimally beneficial process compared to the possible tax benefit.
This is not the case.
Plus retrospective claims can be made for the past two years accounting periods. This can often result in a significant repayment of corporation tax, or if a company is loss making, a claim for R&D tax credits.
Is your business in one of these market sectors?:
Alarms and CCTV
Banking and Finance
Chemicals, paints and adhesives
Clothing, textiles and fabrics
Construction and building materials
Electronic and electricals
Engineering and machinery
Food and drink producers
Games software industry
Household goods and textiles
Insurance brokers (software development)
Media and entertainment
Personal care, cosmetics and household
Pharmaceuticals and biotechnology
Printing and packaging
Property and construction
Software and development
It is important that SMEs examine their suitability for reclaiming tax and work with an adviser who understands how HMRC works. It should take HMRC around four weeks to process a well-structured claim and this could radically alter a company’s year-end financial position and help finance further research and development work or other investment.
Contact us today on 0208 686 7756 or email@example.com to take advantage of a free heath check to identify potential opportunities.