Could a lack of tax incentives awareness be costing SMEs?
Many SMEs are unaware of long-standing tax incentives which could be limiting their prospects for growth, according to the latest data.
Baker Tilly discovered that just 15% of 750 SMEs questioned were aware of research and development credits, despite the scheme being launched nearly 14 years ago.
Yorkshire firms account for just 7% of UK claims for SME research and development tax relief, but it was not the only scheme that businesses were unaware of.
Only 8% of SMEs questioned were aware of the Seed Enterprise Investment Scheme, while just 4% knew of the Patent Box.
Research and development tax credits were introduced with the aim of encouraging greater investment among UK firms.
Failing to innovate sufficiently
The government has since expanded the rules yet further to stimulate innovation, but the latest figures suggest that SMEs are slow on the uptake.
Most of the research and development tax relief that was claimed in 2011-12 was by large companies (£780million) compared to SMEs (£420m).
The majority of this funding could provide a solid financial footing for many SMEs, and by not claiming they could be facing unnecessary risks of corporate insolvency.
Yorkshire and the Humber saw 695 claims for research and development tax relief in 2011-12, worth around £19 million, but that represents just 7% of the 9,875 claims made in the UK.
The survey revealed that a lack of awareness was the major stumbling block and that many businesses used the measures once they became aware of them.
Therefore, it would appear that knowledge is the main issue rather than whether the measures are effective or not.
“Our survey supports what we already suspected, that many UK SMEs are missing out on generous tax incentives, and this may be particularly true in Yorkshire,” said Neil Sevitt, Baker Tilly’s head of SME services based in Leeds.
“The Government certainly needs to do more to raise awareness, but firms in the region should also be asking more questions to find out what’s available.”
By Phil Smith