Recent government figures suggest that millions of pounds in R&D tax relief have been left unclaimed, meaning that SMEs are missing out on money that they could reinvest into their businesses.
Maximising R&D tax relief means SMEs can claim up to 230% on qualifying costs, so it’s important to check your business is not missing out on this very valuable resource. But why aren’t SMEs claiming R&D tax relief, and how can you unlock this potential?
“The answer is twofold,” explains Nick Lowe, Tax Director at Bennett Verby.
“R&D relief often goes unclaimed because it conjures up images of complicated science and technology, leaving companies under the impression that unless they are sending people to the moon, their activities do not qualify. However, if you look at the speed technology has advanced in recent years and the variety of ways it is used in business, this couldn’t be further from the truth.
“The second part of our role when it comes to R&D claims is making sure you’re claiming the full amount. It isn’t just the technology that can be claimed for, but also activities around your project, such as administration and security. You should look at all aspects of your project and keep detailed records to check that you have maximised your potential claim.”
Your business does not have to be a purely scientific or technology-based company to benefit: companies in sectors including Admin & Support Services, Wholesale & Retail, Food & Drink and Manufacturing have all made successful claims for innovative projects. You should bear in mind that a project does not have to be successful to make a claim.
R&D tax relief can be claimed on any amount, large or small, provided all of the qualifying criteria are met. For SMEs, an enhanced deduction of 130% is available in addition to the normal deduction, meaning that for every £100 of qualifying spend, an SME can deduct £230 for corporation tax purposes.
Companies that suffer trading losses should still make a claim. However, the rate of tax credit is lower than the corporation tax rate, so if there is a prospect of future profits, it may be better to carry the loss forward.
You should seek expert advice to see if you can claim research and development tax relief and to make sure you are maximising your claims. Contact our Corporate Tax team here to see if we can help you.