Missing Out on R&D Tax Credits?

Many small firms don’t claim R&D Tax Credits. Many haven’t heard of it. Last year only 7,500 SMEs claimed, averaging £43,000 per claim. But there’s millions more going unclaimed. Many business owners aren’t aware they can reduce their tax bill or get a cash payment through this HMRC Scheme.

If you carry out “R&D activity”, chances are you can claim back more than your actual costs against your Coproration Tax. How much more? More than double! In fact, those nice people allow us to claim 225% (200% last year) of the costs of staff, materials, test/ trial expenses, even software you buy to use in development, against tax. That’s pretty attractive isn’t it?

To be eligible, your R&D activity needs to fit this criteria- it should be incurred on project(s) which seek to overcome technical or scientific uncertainty. There has to be an element of risk- in other words there was no guarantee you would be successful. This usually translates into new product development, or improving existing products or services.

Even on a small scale it’s worth having. For instance, if in June and July 2012 you incurred costs of £10,000 developing a new product, you could reduce your taxable income for this year by £22,500 and boost your profits after tax by up to £6,300. So why wouldn’t you? You can even revise your last 2 years tax returns if you’ve missed a trick.

So if you think you can demonstrate R&D investment, talk to your accountant. Details are at this HMRC webpage, or have a chat with me. There’s more information about funding and subsidies for small firms on PHMC website