There is some great news for those pioneering SMEs that mark their day-to-day tasks with notable levels of innovation. In a bid to make it easier to invest in research and development, the Financial Secretary to the Treasury, David Gauke, recently launched a two-year advance assurance plan outlining how the government is improving access to R&D tax credits.
R&D tax credits have been part of the tax code since 2000 and incentivizes businesses for making improvements to their products, techniques or processes. These credits work by way of super deduction, allowing businesses to reduce profits liable to corporation tax by 230% of their qualifying R&D expenditure. As per HMRCs calculations each £1 foregone by R&D tax relief, stimulates between £1.53 and £2.35 of additional R&D investment.
As noted in our post from last month, the R&D tax credits scheme has been going from strength to strength with the value of claims going upward of £380 million this year. Unfortunately, many SMEs are not aware whether they can qualify or not. This is mainly due to the complex and technical nature of documenting and substantiating the tax credits.
Including opening access to an immediate source of cash for funding growth, tax credits offer the following advantages:
- Recover cash for activities conducted on a day-to-day basis
- Increase cash flow and earnings
- Reduce overall effective corporate tax rate
- Receive permanent tax savings
- Achieve additional tax savings in the future
- More penalties - including up to 100% of the tax owed, if HMRC believed you are deliberately delaying
Latest statistics from HMRC show that 15,000 SMEs claimed the relief in 2013, which is an increase of around 19% from the previous year, but the government wants to improve the take-up and get more small businesses to claim.
According to the Financial Secretary, “We announced in the March Budget we were looking to improve take-up. Take up is good, but we want to go further and we want more people to claim. There’s an element in terms of helping people applying for it for the very first time, there’s a clearance process with HMRC which will be available.”
In summary, keep in mind that R&D tax credits are not just for large companies. In fact, this time the focus is on first-time claimants SMEs with a turnover of under £2 million and fewer than 50 employees. We believe there is considerable scope for businesses from various sectors to take advantage of the programme now and well into the future. If you’d like to talk to anyone from Bradleys please use the form to book an appointment or email us directly.
