FEATURE
BUSINESS BANKING & FINANCE Debunking
the myths of R&D tax relief
Why is it that the uptake on Research and Development (R&D) tax relief is so poor? Although in the last published figures 18,000 SMEs claimed more than £1bn (up from 16,000 claims the year before) it’s still only a fraction of eligible companies. Mick Merrick (pictured), Director at MSC Associates, explores the reasons that might explain the reticence of businesses to take up this tax relief.
MYTH: R&D tax relief is only for companies that are inventing something brand new R&D tax relief is not just for inventing something or getting a patent. It is also available - and most typically used by - companies that are improving or modifying an existing product or improving a manufacturing process - that is, making a product cleaner, quicker, greener or cheaper. Additionally, computer software, architecture and engineering projects are all good candidates for R&D tax relief.
MYTH: R&D tax relief is only for companies that operate in a laboratory setting While companies involved in basic research are obviously prime candidates for R&D tax relief, the relief is very much about encouraging applied science – solving a customer’s problem or a production issue using known scientific principles. Problem solving on the shop floor, in the field, on the site, behind a computer – all may be eligible for R&D tax relief.
MYTH: R&D tax relief is only for the big companies That is what too many small and medium businesses think. While the big companies, with their armies of tax accountants, have welcomed R&D tax relief, too often small and medium businesses act as if there is a velvet rope barring them from taking advantage of R&D tax relief. R&D tax relief is available for small and medium businesses, but you do need to show up and apply to get it – HMRC isn’t simply handing out tax breaks.
‘Too often small and medium businesses act as if there is a velvet rope barring them from taking advantage of R&D tax relief’
52 business network November 2017
R&D tax relief is not just for the big companies
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