- October 24, 2018
- Posted by: Jane Lawler
- Category: R&D
A couple of years ago I was introduced to a company who specialise in accessing government grants and allowances for companies who invest in research and development. I honestly expected their client list to be confined to businesses like Dyson or serious research companies working in artificial intelligence. But I was really surprised to find that their clients included small businesses going about their normal day to day product development.
The government scheme is aimed at SMEs and it pays companies through allowances or reductions in their Corporation Tax bills. But the most shocking thing is that apparently, 80% of eligible businesses have not claimed a penny because they just don’t realise that their activities could qualify. HMRC have said that they think there are about 200,000 qualifying companies but for 2016 they received claims from only 37,000 SMEs.
On some eligible development projects, the grants could be worth up to 33% of the project costs and the average claim is around £53,000 per year. It’s possible to backdate claims for two years and even if the business is loss making, the claim could be paid out in cash or used to offset profits in future tax years.
So why are companies missing out? It’s probably because the scope of the scheme is much broader than is immediately obvious – generally it will be down to the Finance team in the organisation to spot such opportunities and they are probably already stretched to breaking point. Like me, they would probably assume that only scientific research and development would be eligible – but in fact these makes up less than 5% of all claims.
Successful claims are made each year for a diverse range of projects – any new advances in technology, new technical capabilities, improvements in product design and new or improved manufacturing process. Even projects that ultimately fail qualify. All project costs are taken into account – including staff time and even management costs.
You can find out about the basics by checking the relevant gov.uk website pages but I would recommend engaging with a specialist consultancy who can help you to really maximize your claim. Their experience will be invaluable in ensuring that you identify the projects that qualify and then capture absolutely all the associated costs. All the advice I’ve seen encourages the use of a specialist consultancy NOT a general tax or accountancy practice who are unlikely to have a full appreciation of the schemes. The specialist consultancies all take a fee, of course, but these are likely to be on a ‘no win no fee’ basis and on a relatively small percentage of the resultant claim. So almost invariably worth it – after all, which of us has the time to fully research and understand the scheme, and then extract all the information required and make the application, answer follow up questions and do all the admin?
The precise impact on the scheme from Brexit seems, predictably, to be under some debate but the good news is that there is a great deal of optimism and most commentators are confident that the scheme will survive and may even be enhanced after March 2019.