Businesses still missing out on R&D Tax Credits

According to HM Revenue & Customs (HMRC), the majority of claims for research and development (R&D) tax credits are from small and medium-sized enterprises (SMEs), but many firms are still missing out on the benefits they bring.

As HMRC explains, R&D Tax Credits are a tax relief designed to encourage businesses to spend more time and money on research and development, which will, in turn, lead to greater investment in innovation for UK industries. The Government supports businesses by either reducing a firm’s liability to corporation tax or by making payments to them.

However, recent research has found that only 10 per cent of SMEs based in the Midlands, which could be eligible for financial support from the scheme, have actually made a claim.

Other areas are showing promise though. For example, the number of claims made by SMEs has more than doubled since the 2013-14 tax year, and in the 2016-17 tax year, HMRC paid out £3.5 billion in R&D tax relief. This means that qualifying firms have extra cash to recruit more people, develop new ideas or products, or reward workers for a job well done.

Currently, the main sectors claiming for the tax relief are manufacturing, information and communication, and professional, scientific and technical. In total, these sectors submitted 71 per cent of the total claims and received 75 per cent of the total claims during 20116-17.

However, most businesses have some form of research or development capability within them, even if they fail to realise it. Any business owner who thinks their firm might benefit from claiming R&D tax credits should take professional advice.