Businesses are failing to obtain research and development tax
relief and not making claims where they could, despite the
potential to secure "significant" tax refund windfalls.
Small businesses in particular are failing to claim R & D
tax relief believing it does not apply to them or that it is "too
much hassle" according to Terri Halstead, tax partner at the
Birmingham office of Haines Watts.
"The rules have changed but broadly, 200% of the qualifying R
& D costs may be claimed, as a tax deduction by SMEs, for
expenditure incurred on or after 1st April 2011 whereas previously,
it was 175%," said Ms Halstead.
"After 1st April next year, that will increase further to 225%.
The message is clear: the government is keen to encourage research
and development but many companies are either so busy doing their
research that they don't have the time to claim or are simply not
aware that they could apply to them."
Broadly, the scheme is available to businesses that pay UK
corporation tax and undertake qualifying R & D activities and
spend at least £10,000 a year on qualifying R & D
costs.
"R & D activities are qualifying if the objective is to
achieve an advance in science or technology. They can include staff
costs, externally provided work costs, sub contract, consumables
and software. The relief can take the form of an enhanced deduction
against taxable income to reduce the tax payable or even generate a
repayment from HMRC. A number of our clients can vouch that
pursuing claims, even up to two years after the date the costs were
incurred, can produce significant savings."
Terri Halstead is also encouraging businesses to participate in
the current consultation on R & D.
"Everyone admits that it is under utilised but in truth, the
only people that can make a big difference, are the businesses
themselves. We have a generous R & D tax relief regime. But the
government has failed to come up with a solution as to how it can
encourage more businesses to participate. That is for business and
their advisors themselves," said Ms Halstead.
The latest figures available from HMRC show that in the year
ending 2009, there were 6,600 SMEs claiming R & D tax credit
and 2,190 large companies applying.
"The numbers are very low but they are increasing. Spreading the
word does help," said Ms Halstead.
For more information on Haines Watts, please visit their website
here: www.hwca.com