Research & Development tax allowances for SMEs?

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  Posted by: electime      6th August 2021

Research and Development, R&D, it gets written about a fair amount so we know it’s important, so what? Over 50,000 SMEs in the UK have claimed research and development tax relief in the past year, but this is significantly under the total £6 billion budget currently set aside by the government (who have committed an increase to this to be 2.4 per cent of UK GDP by 2027). Opportunities for SMEs in claiming R&D are not just available, but it is something the government is actively setting aside funds for.

So, we know the relief is available and there are funds to pay it – but who is eligible? For a business to quality for SME R&D tax relief, they must have less than 500 employees and a turnover of less than £86 million. They can claim relief equivalent to 130 per cent of qualifying expenditure. If the business incurs a trading loss in the period in which R&D tax relief has been claimed, it can surrender all or part of that loss for a tax credit of 14.5 per cent – vital cash for a business.

Why should businesses take advantage of this tax relief?

Many businesses remain unaware of this option, which can be a great opportunity to fuel (and more importantly fund) innovation. The government wants to use businesses’ tax allowances to invest in technology and science projects, and even if the project is unsuccessful, the claim will likely still be valid. It is part of the governments push to help the UK remain a competitive location for new technologies and research.

We know that innovation is important in any economy and can be highly beneficial for business too – it’s a good way to keep current and keep making a profit.

As Henry Ejdelbaum, MD, comments “R&D grants are often underutilised by SMEs who are eligible to claim the benefit. We always want our clients to benefit from any savings available to them, especially where the funds can be used to fund innovation. My advice would be, don’t assume you aren’t eligible and speak to your accountant who should be able to give you some more guidance.”