Why Do SMEs Leave Thousand Of Pounds Worth Of R&D Tax Credits Unclaimed?
Date: 2nd August 2012
What Is The Problem That Leads SMEs To Leave Research and Development Tax Credits Unclaimed?
The current market situation is compounded by the economic reality and difficulties in the lending sector, which make the availability of cash for investment in Research and Development projects, much harder for SMEs (Small and Medium Enterprises) to find. In this situation an average investment by the government of £43,000, is very welcome indeed – see How Much Did SMEs Claim In R&D Tax Credits Last Year. The level of R&D Tax credits is such that it equates to a very significant injection of capital at a time when it is most needed.
So where are the problems that need to be resolved?
- Not enough SMEs are aware that they do R&D, even when they clearly do… if you understand what R&D includes.
- Not enough professional accountancy practices, which serve the SME community, are spotting that their clients do indeed invest in R&D, even when they clearly do.
- Even when SMEs do recognise that they do R&D they find the scoping of the qualifying R&D, and related costs, quite time consuming and difficult to identify, despite every effort made by HMRC to simplify the claims process.
- Specialist consultancies do their best to help with this work but the cost to the SME is too high. In many cases as much as 20% of the recovered money is paid to help with those claims, and this does not include internal time costs dedicated by the SME. This cannot be right and is not what either the government or HMRC intend to happen.
Given the challenge of precisely identifying qualifying R&D costs with each SME, there is serious scope for both under-claiming and over-claiming. Neither of these situations is desirable, but solutions to these problems are not easy to find, but they are best resolved by improving SME education on the scope of R&D Tax Credit claims.
Call us with your queries on Research and Development Tax Credits… and to find our whether your projects qualify…