Research and development tax credits were first introduced in 2000 to promote investment in innovation. They are open to businesses of all sizes but HM Revenue & Customs is urging more small and medium-sized enterprises to take advantage of this type of tax relief.
“If you are involved in R&D give HMRC a call to find out if you might qualify for funding," says Iain Rickerby, head of the organisation’s Cambridge R&D tax credit unit. "We can advise you on the application process and answer any questions you may have.”
Seven specialist HMRC Units have been set up across the country to help companies make successful relief claims. Experts will visit companies and help them put their claim together, flagging up opportunities they might otherwise miss.
More than 4,500 SMEs are already claiming in excess of £250m each year in tax credits.
The tax relief works by allowing companies to deduct up to 150 per cent of their qualifying expenditure when calculating their profit for tax purposes. This is set to rise to 175 per cent next year. Qualifying expenditure includes: staff costs, consumable items and software, which is directly related to R&D activities.
So how do you know if your company is eligible and how do you apply?
To be in the running, your company must be carrying out qualifying R&D and this must aim to achieve an advance in overall knowledge or capability in the science or technology field.
Small and large companies can apply for R&D tax relief, but there are separate schemes depending on your size.