A new survey suggests that small buisnesses in the UK are missing out on a whole raft of research and development tax breaks.
The Smith and Williamson research shows that while the overall value for Research & Development (R&D) tax credits rose to £2.45bn in 2014/15, thousands of SMEs are missing out on a source of finance to grow their businesses.
According to the research, From 1 April 2015, the government increased the SME R&D uplift on qualifying spend to 230% and the rate of tax credit repayable on surrendered losses for ‘large’ companies to 11%.
Under the current rules, loss-making SME businesses are eligible for a repayment of up to 33% of qualifying expenditure, whereas those which are in-profit can save tax at 46% of qualifying expenses.
‘A generous definition of SME’
SMEs can benefit from an enhanced rate of R&D tax credits compared to larger businesses. To qualify, SMEs must employ fewer than 500 people, and have either an annual turnover of no more than €100 million or a balance sheet total not exceeding €86 million. This is far more generous than many traditional definitions of a SME.
“In most cases, a cash payment from HM Revenue & Customs could have a major impact in the early years of new businesses,” said Matt Watts, director in tax services to businesses at Smith & Williamson. “Equally, if a business is looking to grow and scale their business, a tax repayment could make a key difference.”
“HMRC noted that SMEs have made more claims over the previous year (roughly 2,600 more year-on-year). However, it is our belief that, due to the wide definition of ‘SME’ many are still missing out.”