If you run a small to medium sized enterprise (SME), you can claim (research and development) R&D tax credits. You can use these credits to offset certain product development costs from your corporation tax bill, lowering your outgoings. New data indicates that many SME owners are taking advantage of these tax credits, but that a significant share of small businesses are not aware of their full entitlement.
Claim figures
This data was quoted by Small Business, an advice portal for entrepreneurs. It suggests that in the past year, British SMEs claimed £970m worth of R&D tax credits. This is an increase of 24% on the previous 12 months, when £780m was claimed, but some SMEs are missing out on their full entitlement.
Many UK companies are not aware of the full range of activities they can claim credits for, so they do not receive all the relief available. Just 17,135 SMEs claimed R&D credits in the last year, a rise of only 7% from the year prior. SMEs only receive 48% of funds available under this scheme, even though they comprise 99.9% of UK firms, with IT and communications SMEs receiving the lions share, at £275m.
Benefits for SMEs
It is important to note that the UK’s decision to leave the EU (Brexit), could allow SMEs to benefit further from R&D tax benefits. We have previously noted that Brexit could bring advantages to small businesses. For example, the falling value of the Pound could help UK exporters sell products overseas.
As a result of Brexit, the British government might no longer be required to adhere to EU regulations which limit R&D relief amounts. This would depend on the nature of the UK’s post-Brexit relationship with this continental body, but it could allow the government to increase the R&D relief available to SMEs. This could make the UK a more attractive place to do business, creating new revenue streams.
An example is the patent box scheme. This allows businesses to benefit from lower corporation tax rates on profits accrued for patented inventions, post-April 2013. In its first year, 465 SMEs claimed £15.7m under this scheme, but the UK government had to modify the programme, so it complied with EU rules. With Brexit, Whitehall could now enhance the scheme, providing more generous tax breaks to SMEs.
Expert support
It is key that you look into R&D relief extensively, so you can claim your complete entitlement, reducing outgoings. Remember to keep good records and send accurate annual returns to HM Revenue and Customs, so you can claim all applicable R&D Credits. Via our corporate services, Turner Little can provide advice on filing company tax returns, so your firm can benefit from R&D tax credits.
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