Article originally featured on businessadvice.co.uk
Over half of small UK business owners are completely unaware of the research and development (R&D) tax relief scheme and how it could benefit their company, according to new survey findings.
The research, from tax relief experts Catax, uncovered significant misconceptions about R&D tax relief and who it could be available to. Over four in ten respondents believed it was restricted to specialist drug, science and technology firms.
“The ‘people in white coats’ myth urgently needs to be debunked because currently SMEs are losing out,” said Catax CEO Mark Tighe.
The R&D tax relief scheme was introduced in 2000 as a way to boost innovation and wealth creation in the UK economy, by encouraging development projects among businesses.
For smaller firms, the tax credit works by allowing business owners to deduct 125 per cent of eligible research and development costs from the company’s total taxable income. It a company makes a loss, the scheme is extended to allow a cash payment of up to 32.63 per cent of eligible investment in the project.
Catax research suggested 57 per cent of all small businesses could be eligible for funding, with the basic requirement for R&D tax relief simply developing a new product or service. It claimed owners of smaller firms could be missing out on hundreds of millions in tax credits every year simply from a misunderstanding of eligibility criteria.
In a statement, Tighe, explained that a broad range of industries could benefit from R&D tax relief, pointing out the average tax benefit of £39,000 for Catax clients.
“In reality, a restaurant creating a new recipe, a brewery experimenting with a new pint or a business trying to streamline its IT with some proprietary cloud technology could all be eligible for tax relief.”
Low levels of awareness of R&D tax relief in the small business community continue to exist despite chancellor Philip Hammond using the Spring Budget to confirm further assistance to smaller firms in accessing the tax credit.
Hammond insisted the UK’s R&D tax relief scheme was “globally competitive”.
“With its desire to future-proof the UK economy, the government is doing its level best to raise awareness of R&D. But the results of this survey show that the majority of UK SMEs are still unaware that this valuable and widely available tax relief even exists,” Tighe added.