Are SMEs missing out on potential tax relief?
Thousands of the UK’s small businesses could be missing out on welcome financial assistance in the form of tax relief, according to new research.
Breakthrough Funding has suggested that nine out of ten SMEs who could apply for around £50,000 via the Research and Development Tax Credits scheme have failed to do so.
It is thought that many firms are unaware of the scheme although it could provide financial assistance to companies who are at the forefront of driving innovation.
The scheme has existed for 15 years and paid out to more than 16,500 small businesses during the 2013-2014 financial year.
The latest research and development tax credit figures suggest that some 33,800 companies have benefited from the scheme since its introduction – awareness of it is therefore growing but it could be far higher.
Scientific and technical firms dominate those who have used the scheme, with businesses in the manufacturing, professional and IT and communications sectors accounting for 81% of all claims by value.
The scheme is designed to reward firms that self-fund research and development projects and is available to any business, regardless of whether they are running at a loss or are in the black.
It could therefore help ease the burden placed on a business’ finances, especially for firms operating on smaller budgets.
A successful claim could potentially help to fend off the prospect of Company Administration or the need for other financial processes for development firms that are running at a loss.
It is imperative that these companies are aware of their options and of what failing to act could mean in the long term.
In order to qualify for the scheme, innovative projects must be either scientific or technical in nature and should deliver some sort of advancement in knowledge or operational capability.
Many smaller projects can deliver on these goals but the businesses behind them have not opted to claim.
Costs for subcontracting work, for the development of prototypes and for software creation may all be covered – research and development businesses should therefore check to see if they can make a claim.
By Phil Smith
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