Does your firm qualify for R&D tax relief?

Shaun Bartle Finch & Associates

Data shows that innovative firms across the region may be losing out on valuable R&D tax credits. Shaun Bartle of Finch & Associates explains who can make a claim.

The South West has become a hotbed for business innovation but the region’s firms need to continue investing in research and development to stay ahead.

The good news is there are generous tax incentives that can amount to tens, even hundreds of thousands of pounds, for growing businesses that push the boundaries of innovation.

But recent statistics from HMRC suggest that many firms in the region, across a wide range of sectors, could be losing out on these valuable R&D tax credits.

The latest data shows there were just 245 claims nationally for R&D tax credits by SMEs in the water, sewerage and waste sectors during 2017-18, totalling only £10m.  And there were just 335 claims by SMEs in the agriculture, forestry and fishing sector, and a measly 210 in the accommodation and food sectors, totalling £15m and £5m respectively.

This compares with a whopping 10,490 claims by SMEs in the information and communications sector worth an eye-watering £600m. Even the huge construction sector could manage only 1,790 claims worth a much smaller £90m.

The figures also reveal that when it comes to making R&D tax credit claims, SMEs in the South West lag behind some other regions including the South East, North West and West Midlands.

You may think only firms at the leading edge of science and technology can benefit and that your business won’t be eligible for R&D tax relief.  But the work you do doesn’t have to involve scientists in white coats working in laboratories to qualify.

Any UK limited company that develops new innovative products, processes or services, or improves existing ones, could be eligible to make a claim. This means that SMEs in any industry, from food and farming to finance and the law, could make a claim if they’ve found a new way to do or make things.

R&D tax credits can be a great source of additional income that allow you to further develop your ideas and your business. Qualifying SMEs can claim up to 33p for every pound spent on R&D while larger businesses – those employing more than 500 people – can claim 12 per cent of their qualifying expenditure.The sort of expenses that qualify for R&D tax relief may surprise you. They can include staff and subcontractor salary costs, and expenses such as heat, light and power. You can even claim for certain types of software.

The potential sums on offer can be truly game-changing for small businesses in the region that are breaking the mould. And if more local firms take advantage of the tax incentives on offer, it will help to protect the region’s status as a leading centre for innovation.

Shaun Bartle is Tax Advisory Manager at the tax advisory firm Finch and Associates which specialises in creative industry taxes.