MONEY MATTERS
SME BUSINESSES STILL LOSING MILLIONS IN UNCLAIMED R&D TAX CREDITS
UK SMEs are missing out on hundreds of millions of pounds of tax credits by not claiming for new product research and development costs.
The warning, from new product development consultancy, Pera Technology, one of the UK’s leading SME funding and business support consultancies, is driven by concerns that 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 the 2000-01 financial year, when less than 2,000 SMEs claimed relief, 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.”
CLAIMS AVAILABLE 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 225% of R&D costs, which could include specific costs such as staff costs, subcontractor costs,
consumable or materials, power, water, fuel and computer software that is used directly in carrying out R&D.
RECENT STATISTICS The most recent statistics from HM Revenue & Customs suggest that less than 10,000 SMEs claimed tax relief last year, from a UK SME base of 4.8 million. Simon Day, an expert in R&D tax credits at Pera Technology, says that awareness of R&D tax relief is improving amongst SMEs but there is still a long way to go.
“Many SMEs are involved in R&D and the HMRC definition by no means restricts the ability to claim to hi-tech or pharmaceutical industries. Many SMEs do not realise that they have eligible projects, worry that the process is too onerous and costly or, more commonly ‘package’ the R&D tax claims as part of their wider tax claim which often limits its potential.”
R&D TAX CREDIT ADVICE R&D tax credit advice forms part of Pera Technology’s new leap® package of business support services, which cover all aspects of new product development from idea conception, feasibility evaluation and securing funding, right through to in-depth research and development programmes and commercialisation.
Mr Day says that the big issue 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,” says Mr Day. “Product improvements, new ranges and new production processes can also be eligible.”
He continued: “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.”
Pera Technology Click to view more info
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