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The majority of the UK’s small and medium-size enterprises (SMEs) are not staking their claim to a tax benefit aimed at supporting their growth.
Almost nine out of ten SMEs are not making full and proper use of the research and development (R&D) credit, according to Chantrey Vellacott DFK, a firm of London accountants, based on figures from HMRC that suggest just 17,000 out of 150,000 potentially qualifying firms make claims.
The low take-up is a result of lack of awareness of the scheme and a mistaken belief it applies only to scientific and pharmaceutical industries, said the accountancy’s head of R&D, Steven Levine.
He added, “There is a misconception of R&D taking place only in laboratories, which means innovative work and problem-solving in many other industries, such as construction, logistics design engineering, manufacturing and new media, can be easily missed.
“The complexity of the tax relief scheme also means companies that do make a claim often make the wrong type of claim, or don’t claim for the full amount. Nearly 90% of SMEs are not claiming what they are entitled to and are losing out on what could be a vital cash injection.”
Early this year, the government held a consultation on plans for an above-the-line R&D relief that would be have broader appeal than the current arrangement, which is a super-deduction that reduces taxable profits.
Where the credit cannot be offset against the company’s corporation tax bill – due to losses, for example – the new scheme will allow a claim for a cash payment from the Treasury, and the benefit can be legitimately recorded in accounts in profit before tax, rather than as a reduction in the tax charge.
