Recent research has found that small businesses are not claiming the research and development (R&D) relief they are eligible for, possibly because they are unaware the tax relief actually exists.
Incredibly, the research found that almost eight in 10 small and medium-sized enterprises (SMEs) are likely to be eligible for R&D tax reliefs but more than 50 per cent of these businesses are not claiming it.
If those figures are extrapolated, then two-thirds of the UK’s 5.7 million SMEs are not claiming, which equates to a whopping 1.6 million small firms that are missing out on this valuable relief.
There are many reasons for this, from ignorance of the existence of the relief to the belief that it would be very complex to apply for. Other business owners also believe that R&D relief is only for firms working in the scientific arena.
However, the truth is that any business that innovates could apply, as the relief relates to research and development in any sector, from a restaurant that is developing new dishes to manufacturers who are designing new closure mechanisms.
An important point to note is that the R&D does not even have to be successful to qualify. The only criterion is that time or money has been spent on a new product, process or service.
There is also the belief that applying is time-consuming and expensive, which is also not the case. Even if a firm decides to take on a specialist firm to look after the claim for them, most of these take their commission from a successful claim and engage their own in-house expertise to handle it from start to finish.
With the money that is there for the asking and the innovation that the UK needs in business, any eligible firm should really consider applying. If in doubt, they can always take professional advice.