Is your SME missing out on R&D tax credits?

R&D tax credits for SMEs

Back in April 2000, the UK government introduced a scheme to encourage businesses to invest in research and development. With the aim of ensuring Britain stays at the forefront of scientific and technological innovation, they started to reward R&D projects with tax credits.

The problem is that, 18 years on, many businesses are still unaware that they qualify for the relief. While it’s true that 2015-16 saw a 20 percent increase in claims, many companies are still missing out on the rewards they are due for finding solutions to problems within the fields of science and technology. Here, we lay out the facts to help you recognise if your work is eligible.

The SME scheme

A specific scheme – the SME scheme – is in place for small and medium-sized businesses looking to claim tax relief for R&D projects. For the purpose of this scheme, an SME is one which has fewer than 500 employees and which has an annual turnover of under €100m or a balance sheet total under €86m.

The scheme provides a generous reward for such businesses, which potentially makes the difference between insolvency and the continuation of their work. In a nutshell, for every £100 spent on R&D activity, a company’s taxable profits could be reduced by £130, in addition to any money spent. Even loss-making organisations can benefit, as do those whose projects were not successful.

Qualifying costs

Certain costs associated with an R&D project are eligible for a claim. These include expenditure on staff salaries, Class 1 NIC payments, utilities, consumables and even a percentage of subcontractor costs. In addition, certain software licences can be offset.

In order to claim for these expenses, it’s important to keep a record of them, as supporting evidence must be provided to HMRC for the best chance of a successful claim. It’s advisable to keep account of any costs associated with your project via a specific folder on your system, ensuring that when it comes to making the claim, the figures can be accessed easily.

Eligibility

Of course, the work you do has to be eligible in order for a successful claim to be made. You must be able to prove that your work sought to resolve a scientific or technological uncertainty; that another professional in the field couldn’t easily resolve it; and that the work could have a positive impact on the wider sector, rather than simply benefitting your company.

These guidelines are deliberately vague. In being so, they enable a wide array of businesses in a number of sectors – from food and drink to aviation – to take advantage of the reward on offer.

It’s advisable to seek professional help when it comes to submitting your claim, which is made as part of the Corporation Tax return. Specialists such as R&D Tax Solutions in Manchester have extensive experience with helping companies with their claims, and can deal with the complexities of the process while you focus on your business.