R&D tax credits can provide a very useful boost to innovative companies as they help them to offset the cost of research and development and reduce the amount of corporation tax they pay.
We are pleased that the government is going to be raising awareness of this tax relief and making it easier for businesses to claim.
Statistics show that more than 15,000 SMEs successfully applied for R&D tax credits in 2013-2014, receiving a total of £800 million in R&D tax relief. Whilst this is an increase of almost 20% on the year before, it still represents a very small proportion of all those businesses that are undertaking research and development activities – something that has clearly been recognised by the government.
The plan – ‘Making R&D Easier: HMRC’s plan for small business R&D tax relief – is the result of HMRC consultation and sets out two key commitments:
Businesses with fewer than 50 employees and a turnover under £2 million will be able to get advance assurance on their tax relief. This will be a great help in enabling business owners to plan their finances and expenditure.
HMRC will seek to proactively identify companies that have carried out R&D but not claimed relief. We are not sure how this will work in practice but it sounds a good idea. An important thing to note is the breadth of activity that can be eligible for R&D tax credits. ‘Day to day’ process improvements as well as major R&D projects can qualify.
At Clayton & Brewill we regularly help businesses to make R&D tax credit claims, including a successful £50,000 claim for DB Brooks, a firm of electrical contractors in north Nottingham. Click here to find out more about this successful R&D tax relief claim.