Many of the region’s small to medium sized businesses (SMEs) are still failing to take advantage of the generous tax breaks that are available when it comes to Research and Development (R&D), and we regularly see companies only claiming back a fraction of what’s actually available to them.
Sometimes businesses have preconceptions that they ‘don’t do’ R&D, or that it’s such a small investment that it’s not worth making a claim, but often it’s surprising how much a claim can be worth. Others are put off by the fact they believe it’s only heavily scientific or technological projects that qualify – but that is simply not the case.
The idea of these tax incentives is to encourage innovation among UK businesses and at BHP we have a hugely successful track-record of working with companies to ensure they take full advantage of all the relief available to them.
The tax relief is available across all types of initiatives including patents, new manufacturing processes, environmental improvements, software development and product development. It can cover the costs of staff working on R&D projects, expenses relating to materials and equipment as well as costs for subcontractors that have assisted with such projects. Even R&D projects that have been unsuccessful are eligible for the relief.
Since the incentive was first introduced in 2000, the rates have gradually become more generous and are now worth up to 230% for SMEs. This means that for every £100 of qualifying costs, an SME could reduce its Corporation Tax by an additional £130 on top of the £100 spent.
R&D tax relief is something all SMEs should investigate as a matter of course. The first thing that needs qualifying is a company’s status as an SME, as this definition for R&D purposes isn’t necessarily the same as that used by HMRC in relation to other tax areas such as Corporation Tax or PAYE.
A quick telephone conversation to your advisor can determine whether a claim can be made, or feel free to contact myself.