Businesses both large and small benefited from £3.5 billion in tax relief from the often-neglected tax credit, which helped contribute towards £24.9 billion of R&D expenditure across the nation.
However, many more businesses are potentially missing out – as there is a common misconception among the business community that only the very largest firms or most innovative projects can benefit from the relief.
SME R&D relief
In reality, many smaller businesses can benefit from R&D tax credits too, as there is more than one type of this tax relief available.
Small and medium-sized enterprise (SME) R&D Relief, which is available to businesses with fewer than 500 members of staff or a turnover below £87 million, can enable small businesses to deduct an extra 130 per cent of their qualifying R&D costs from their yearly profit, as well as the normal 100 per cent deduction, to make a total 230 per cent deduction – which equates to an additional 33p for every £1 spent on R&D.
However, businesses that want to take advantage of this need to meet certain eligibility criteria.
In order for a project to be eligible for R&D relief, it must have involved a search for an advance in science and technology or tried to overcome uncertainty using a method or procedure which couldn’t be easily worked out by a professional in the field.
This can cover a wide range of innovations and procedures conducted during the R&D process.
Naturally, the rules surrounding R&D tax credits are complex and small businesses may find the criteria governing what is and is not eligible confusing. With this in mind, it is always wise for firms to seek specialist advice.
At Howard Worth, we have many years’ experience in advising small businesses on these kinds of tax reliefs – and we want to help you.
For help and advice on matters relating to R&D tax credits, contact our expert team at Howard Worth today.