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Cash in on your innovations

Date: 22nd February 2014

Many companies could be missing our on the R&D Tax credits they are entitled to according to Geoff Bennett a consultant with RandDTax. We often wonder why so few companies claim research and development (R&D) tax credits. Geoff wrote an article on this which was R&D tax feature which is on the link in full.

Based on our experience of helping some 300 SME clients over 11 years, we have found that many companies and their accountants simply do not recognise when they do R&D. Because of this, less than 0.5% of smaller companies actually claim R&D tax credits.

Many companies do not appreciate the full scope of what constitutes R&D. This can lead to them making no claim or low claims. Some accountants do not recognise R&D, often because their clients do not, or they have snippets of information which lead to wrong conclusions.

In general, companies are often too modest and see R&D as something that is only for scientists. A smooth, full potential claim requires good knowledge of the guidelines and how HMRC deals with claims, and some companies feel they do not have the time to go into it.

At current rates, an SME with £100,000 of qualifying R&D expenditure would be able to reduce its corporation tax bill by £25,000 or, if it was loss-making, it could receive a credit in cash of close to that amount. These sums can make a significant impact on R&D budgets.

Effective R&D can have a huge impact on corporate success and the bottom line. One client explained to me that his company would need to generate sales of about £1m in order to have the same bottom line impact that his first R&D tax credit payment had made. Think about that!

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