Over £1bn in R&D tax relief claimed by SMEs in 2014-15!
Is your company one of the many that is benefiting from the generous tax breaks available under the UK Government’s Research and Development (R&D) tax credit schemes?
The latest statistics indicate that the number of Small and Medium Enterprises (SME’s) making R&D tax credits claims is rising year on year with a total pay-out value of over £1b in 2014-15.
“A SME may claim a higher rate of relief than a large company. Also, a SME which has no tax bill to reduce may claim a cash payment instead.”
SMEs are also gaining an increasing share of the total amount paid out by Government. In 2014-15 the total tax relief support was £2.45 billion of which £1.1bn was claimed through the SME scheme. In 2013-14 the total amount paid out was £1.75bn of which £800m was claimed through the SME scheme.
This is excellent news as it indicates that more of the smaller UK Limited Companies are aware of the generous benefits that can be claimed under the R&D schemes. However there is no room for complacency as there is still evidence that significant numbers of SMEs either don’t know about the schemes or have misconceptions about the types of activities that qualify.
“R&D Tax Credits are a tax relief designed to encourage greater R&D spending, leading in turn to greater investment in innovation. They work by reducing a company’s tax bill by an amount equal to a percentage of the company’s allowable R&D expenditure.” (See below for SME claim rates)
The SME R&D scheme is applicable to companies with under 500 employees (that meet certain qualification criteria) while the Large Company R&D scheme and the newly launched RDEC scheme, is for companies with over 500 employees.
Volume of claims
The graph below shows that from 2011-12 to 2014-15 the number of claims from SMEs increased from 10,030 to 18,630 – a substantial 46% increase.
Overall value of the benfits claimed
The rise in the value of the benefits claimed by SME’s was even more impressive, increasing from under half a billion in 2011-12 to well over a billion pounds in 2014-15. This in part is attributable to a rise in the level of benefit claimable per pound spent on R&D activities, as the SME scheme has been improved several times in this period.
The graph below shows the total value of the benefits claimed per year under the SMEs R&D scheme.
SME claim rates
If profitable an SME can benefit from a tax reduction worth 25% of their R&D costs, so £10k for every £40k spent (rising to 26% for expenditure after 1st April 2015). Or if the company made a trading loss in the claim year, the cash benefit available is between 18% and 33% of their qualifying R&D costs. Clams can be made going back two years based on a company’s accounting year end date.
All quotes and data from: HMRC Research and Development Tax Credits Statistics: September 2016
Are you ready to find out if you qualify or how much your R&D claims could be worth?