Business experts

Expert opinion: Don't dismiss valuable R&D tax relief

Written by Martin Gurney.

Martin GurneyMany of you will have heard of ‘Research and Development tax relief’ yet have you taken any time to consider if your business might qualify?

Many business owners dismiss this valuable scheme as being irrelevant to their activity and they let it pass them by.

I cannot urge you enough to take some expert advice as many, many businesses do qualify for this relief. Some business owners have even been told ‘no’ and that advice is simply incorrect.

You may think ‘he’s bound to say that?” however that’s not the case. The evidence on uptake of this relief across the South West does support this view.

I’ve worked with several local businesses to help them access the relief – yet very few companies are taking advantage of it.

Recently HMRC unveiled new statistics showing there were 39,960 R&D tax credit claims for the tax year 2016 to 2017 and the majority - 34,060 - are in the SME R&D scheme.

While it’s good to see the majority of claims are coming from the SME sector as this is the backbone of our economy in the UK - only a fraction of those companies which could make a relevant claim are doing so.

Many local companies are doing innovative things to grow their businesses which could qualify.

Examples of activities might be:

  • Productising a service eg. online courses to create a new income stream.
  • Creating a new system or process to automate a part of a business allowing for growth.
  • Integrating different systems to create a competitive advantage.

It’s important to take the proper advice from an accountancy practice which has the expertise and knowledge. It’s also critical to do this before starting a new project to see if it qualifies and, if it does, to plan finances accordingly.

I’ve recently helped one new client, providing supply chain software, to claim relief for the continuing development and improvement of its software. Their previous adviser had suggested they were not able to make a claim.

R&D tax relief is a valuable way of rewarding companies which are investing in innovation, either to create something new in their field or to improve on existing technology.

The HMRC figures also show during the tax year 2016 to 2017, £3.5bn of R&D tax relief support has been claimed, corresponding to £24.9bn of expenditure on R&D projects nationwide.

A breakdown of the statistics show claims are concentrated in companies with a registered office in London, the East of England, or the South East.

These figures show clearly the South West region is not taking full advantage of this type of tax relief. We are home to some of the most innovative companies in the country and yet the overall figures show most companies area not even exploring the possibility that they may qualify for this valuable government tax relief.

Between the launch of the R&D tax credit scheme in 2000/01, and 2016/17, over 240,000 claims have been made and £21.4bn in tax relief claimed.

Martin Gurney is a tax partner at Haines Watts Swindon.