Small and medium sized firms still missing out on research and development tax relief

The two year window for making R&D claims means reporting this information is always somewhat historical, but nonetheless, for the latest figures available, the total tax relief claimed was approximately £6 billion, with half apparently claimed by small firms.

Although this equates to a 19% year-on-year increase, the consensus is many small to medium sized companies remain eligible but still unaware of the tax savings available to them.  

Furthermore, the £6 billion total is a long way short of the UK Government’s commitment of £22 billion in R&D tax relief by  2024-25.

Where SMEs are engaged in a valid R&D project, they can claim additional relief  equivalent to 130% of qualifying expenditure, giving 230% in overall relief to be used against taxable profits – here the relief is calculated at 19%.

In addition, firms with surplus tax losses can surrender these in favour of a repayable tax credit – this time calculated at a slightly lower 14.5%.

For a company to be eligible for the SME relief, they must have fewer than 500 employees and a turnover of less than €100 million (£86 million), or a balance sheet of less than €86 million.

The primary stipulation is that a project seeks to achieve an overall advance in science or technology. This must be something that cannot easily be solved by a competent professional working in the same field. It often comes as a surprise that claims for R&D tax relief are still valid even if the project proves unsuccessful.

Following the country’s exit from the EU, the Government is placing significant importance on R&D investment in order to keep innovators working within the UK. HM Treasury is committed to supporting all eligible claims - 95% of which are said to be processed within 28 days of submission.

How can we help?

If you are unsure whether your recent projects count as qualifying capital expenditure for a valid research & development tax relief claim, we’re here to support you all the way.

Our friendly and experienced tax experts can work with you to determine your eligibility and prepare your R&D tax relief claim.

Remember – you can claim tax relief on qualifying R&D expenditure up to two years from the end of the accounting period in which the project occurred.

To arrange your free initial consultation on your tax relief eligibility, call us today on 01788 574440 or drop us a line using our online enquiry form.

Last updated: 20th March 2024