New figures from HMRC show that the overall value for Research & Development (R&D) tax credits rose to £2.45bn for 2014/15 but thousands of businesses are still missing out and time is running out for them to claim for calendar year 2014, warns Smith & Williamson, the accountancy, investment management and tax group which has offices in Bristol and Cheltenham.
From 1 April 2015, the government increased the SME R&D uplift on qualifying spend to 230% and the rate of tax credit repayable on surrendered losses for ‘large’ companies to 11%.
Loss-making SME businesses are now eligible for a repayment of up to 33% of qualifying expenditure, whereas those which are in-profit can save tax at 46% of qualifying expenses.
Dave Mouncey, a tax partner in Smith & Williamson’s Bristol office, said: “In most cases, a cash payment from HMRC could have a major impact in the early years of new businesses. Equally, if a business is looking to grow and scale their business, a tax repayment could make a key difference.”
He continued: “HMRC noted that SMEs have made more claims over the previous year (roughly 2,600 more year-on-year). However, it is our belief that, due to the wide definition of ‘SME’ many are still missing out.”
SMEs can benefit from an enhanced rate of R&D tax credits compared to larger businesses. To qualify, SMEs must employ fewer than 500 people, and have either an annual turnover of no more than €100 million or a balance sheet total not exceeding €86 million. This is far more generous than many traditional definitions of a SME.
“Companies in the early years of trading are often under pressure from a cashflow perspective. If the company is spending money innovating and advancing technology, a claim for R&D tax relief resulting in a cash repayment can be extremely valuable,” said Dave.
Shortage of claims in some industry sectors
He continued: “The figures indicate there are a number of industries which have yet to capitalise on the benefits that R&D tax credits offer such as the construction and real estate, and financial and insurance industries which account for only 2% and 1% of the total. Projects in IT are often eligible for R&D tax credits and considering the developments in construction methods, online estate agents and increasing automation of many financial services it is surprising that there have not been more claims.”
“The financial services average claims are higher than the SME average which leads us to believe there are a number within the financial services sector who are missing out.”
R&D claims by SMEs from 6 April 2014 to 6 April 2015
|Sector||No. of claims||% of total No||Average|
|Finance and insurance||190||1%||£79k|
|Construction and Real Estate||425||2.1%||£35k|
|Arts, Entertainment and recreation||135||0.7%||£111k|
|Health and social work||165||0.9%||£61k|
|Total SME claims||18,450||100%||£56k|
To find out more, please contact Dave Mouncey on 0117 3762000 or firstname.lastname@example.org