The taxman can help ANY company involved in ‘research and development’
07 Aug 2017
The taxman can help ANY company involved in ‘research and development’… that could mean YOU, so don’t miss out!
Recently, we spoke with a motorsport engineer who never thought that improving the performance of a product for a customer could shrink his tax bill. “If we need to devise a new component for a client, some work will be done to prepare that” he said, and was surprised to be told that can qualify as ‘development’ for tax credit purposes.
He just had to start applying for research and development (R&D) tax relief for his high-performance engineering business, which is continually improving the performance of, and making new products for, motorsport.
Since 2000, R&D tax credits for small and medium sized enterprises (SMEs) in the UK have boosted innovation. Businesses which use resources or spend money on improving existing products, or developing new ones, can get a substantial reduction in their corporation tax, or even receive a cash payment if they are loss making.
In simple terms, up to 33p for every £1 spent by a business on “advances in science and technology” can be clawed back from HM Revenue & Customs, who work fast and usually take just four to six weeks to process a claim.
Over 40,000 SMEs have made claims since the tax credit was launched, since when variants of the scheme have been devised for larger businesses too.
In the 2014-15 tax year, £2.5bn of R&D tax relief was claimed – a fourfold increase on the previous year – with some 18,600 SME’s claiming 40% (i.e. over £1bn) of that figure. Whilst this substantial increase in uptake by SMEs is encouraging, a lack of awareness and daunting jargon still deters many companies from applying.
“R&D Tax credits are increasing the international competitiveness of many MIA members, often being used directly to employ more engineers to help grow their R&D based businesses” said Chris Aylett, CEO of the Motorsport Industry Association (MIA). “Many develop and improve the performance of engineering solutions, much of the cost of which qualifies under this scheme for a credit, which can then be re-invested”.
Surprisingly, only 5% of small businesses take advantage of R&D tax credits, according to a recent survey, compared with 50% of large companies. It seems some 20% of SME business owners remain completely unaware of the incentive being offered by HMRC.
To help SMEs overcome bureaucratic hindrances, specialist consultancies have sprung up offering expert help. Since 2013, just one has helped 2,500 companies get cash back in return for a fee worth 20% of a successful claim, and have won £50m of R&D tax credits this
The MIA ( www.the-mia.com) has created a simple, FREE guide to making successful R&D tax claims. This gives details of expert consultancies who have helped motorsport and high-performance engineering clients.