TaxAdministrationSMEs miss out on £125m in R&D tax credits

SMEs miss out on £125m in R&D tax credits

Grant Thornton says thousands of SMEs are missing out on a R&D credits totalling £125m a year

Grant
Thornton
says thousands of small to medium sized businesses (SMEs) are
missing out on R&D tax credits totalling £125m a year because they are being
hamstrung by restrictive categorisation of what
HM Revenue &
Customs
believes constitutes innovation.

In the four years after the inception of research and development (R&D)
tax credits, the amount claimed by UK businesses has increased by more than 800%
– but as a percentage of UK gross domestic product (GDP) R&D has remained
relatively flat over the last 10 years, dropping from 1.78% in 1997 to languish
at 1.75% in 2005.

Sarika Patel, Grant Thornton head of technology, said R&D was no longer
the sole domain of scientists in lab coats and was potentially a facet of every
business. ‘Anything that adds value to a product or process is potentially
entitled to tax relief, but in our experience businesses are not actively
looking out for this,’ she said.

‘There are issues with complexity which the Government needs to address. It
also needs to provide clarity as to how R&D tax credits apply to a
business’s everyday operations and hurry through current R&D proposals
awaiting EU approval.’

Further reading:

French video game developers get tax break

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