UK start-ups miss out on R&D cash

Link: New plans to boost corporate research

In his 2000 budget chancellor Gordon Brown made available £150m in tax credits for small and medium sized enterprises, to boost UK innovation by encouraging spend on R&D. And now the government says that £150m ceiling has been removed.

But according to the government’s own figures just over a half of the money originally made available in the form of tax credits to SMEs has been claimed.

‘In its first year the government invested £80m through the tax credits,’ a Department of Trade and Industry spokeswoman confirmed to VNU News Centre.

The Inland Revenue originally estimated 4,500 companies would benefit from the tax credit scheme but accountancy firm The Norton Practice, which specialises in dealing with technology companies, said few businesses are aware they can claim the money.

‘A lot of companies have probably been aware there is something there. What they don’t realise is they can get cash back,’ said Andrew Norton, managing partner at the Norton Practice.

Small and medium-sized businesses can claim 150 per cent tax relief on R&D work over £25,000 a year, but those not yet making any profit can surrender that for a lump cash sum.

‘The normal rule is 150 per cent of R&D cost as a tax deduction,’ said Norton. ‘But if you are in a loss situation you can get up to 16% of that back as cash. So £100,000 spent on R&D would get £24,000 cash back, which could be vital for many start-ups.’

Norton said it is vital companies have a concrete case to support any innovations as qualifying R&D.

‘Businesses need to make sure they have the technical argument right. It is a job for the chief technology officer, not the chief financial officer.’

A spokesman for the Inland Revenue claimed take-up of the tax credits had already exceeded expectations.

‘It will be 2003 at earliest before we have a better picture on the take up by SMEs and any hard data at all for larger companies,’ he said. ‘And the Inland Revenue has been running roadshows throughout the summer to promote the credit, which were well attended and received by business.’

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