The UK government spends a lot of time and money encouraging small companies to innovate. One way they do that is via R&D tax credits, which launched in 2000. “This has been a surprisingly consistent part of government policy and is part of efforts by the government to increase overall R&D spend to 2.4% of GDP,” Chris McDonald, Enterprise and Innovation policy chair at the FSB said recently.
The scheme aims to reward investment by companies in research and development and are designed to offer particular advantages for SMEs, allowing them to claim back up to 32% in development costs each year; even including staff/contractor costs. The goal is essentially to reduce your losses and to make your capital that you’ve invested in the business at an early stage while you’re making a loss go as far as possible.
However, despite repeated efforts to raise awareness of the allowance – and how it can help smaller firms grow – take up has historically been stubbornly slow. But if you are engaged in anything that falls within the remit of research and development then you could qualify. The government has produced a handy guide to understanding if you have any eligible work at your business.
There are a number of different versions of the tax credits. Many smaller companies will qualify for SME R&D relief, a scheme that allows companies to:
- deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction
- claim a tax credit if the company is loss-making, worth up to 14.5% of the surrenderable loss
If you’re interested in exploring this area we can help you with the paperwork. Just get in touch and we can make a start.