Is your small business missing out on Research & Development tax credits?
Just over a week ago, an article about R&D tax credits on The Times’ website caught my eye.
The piece opened with the example of organic farming business owner Richard Holingbery, who hadn’t heard of R&D tax credits until an acquaintance mentioned them to him last year.
Mr Holingbery regularly creates new cheeses and also devises a number sidelines to his core activities such as making vodka. Because he was making new products, he decided to apply for the R&D tax credits and received £44,000 over two years.
The story put me in mind of some of our clients who have made similarly successful claims. But the fact remains that only a tiny proportion of businesses do apply for R&D tax credits, and a surprising number of business owners don’t even know about them. Chris Vincent, MD of a flooring company who responded to The Times’ article pointed out that while 50% of larger companies claw back some of the cost of their R&D, only 5% of smaller firms are doing the same.
So what’s the barrier? I think part of the problem is that HMRC’s guidelines for claiming R&D tax credits are – to put it mildly – rather ambiguous. In theory, if a project seeks to ‘achieve and advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty’, then it will qualify.
So far, so good. But when you then read in detail all the conditions to be satisfied, then you find yourself being washed away by a sea of muddy jargon. As one blogger has written, many applications are likely to ‘fall into a grey area’ where the likely HMRC response is “submit it and we’ll evaluate it when we see it.”’
This is all very well, but it does mean that you could spend many hours providing HMRC with highly detailed information about your R&D project, only to find that it doesn’t qualify. On the other hand, you don’t want to be put off by the application process if there’s a chance you will benefit from thousands of pounds.
My advice would be to talk to an account manager here at THP. Our specialist R&D consultant contacts have significant experience at guiding firms through the application process, and can assess your project in the light of the regulations. If they think you’re likely to succeed in a claim, then together we’ll do all we can to help you make it.
So, over to you. If you do anything that you think may stand the slightest chance of being classed as R&D, talk to us today – it could mean a nice chunk of your tax bill will evaporate!