Limited Companies have 2 years from the end of their accounting period to submit an R&D claim for expenditure incurred in that period, so as the clock strikes midnight on 31st March 2015, companies that have yet to submit an R&D claim for their accounting period ending March 31st 2013 will lose the opportunity to recoup that expenditure. With the average SME receiving over £46,000 annually under HMRCs scheme, it’s mind boggling to think how much is being lost by those companies who are developing new products, processes and services, that are still yet to recognise that they qualify for R&D tax relief.
There’s considerable disagreement about the precise number of eligible companies that are missing out each year, but most estimates indicate that between 50-85% of companies eligible to claim relief under the scheme are still failing to submit claims. Within sectors with a historically low rate of R&D claims, such as defence and food, it’s likely that the number of companies missing out on tax relief is considerably higher.
In 2012-13 just over 13,000 SMEs claimed R&D tax relief under HMRCs scheme, up an impressive 30% on the previous year. For businesses in the South West just 1,265 claims were submitted. These businesses shared over £600m, an increase of over 40% on the amount SMEs claimed the year previously. Things are certainly improving, but a huge number of companies still fail to submit claims for the relief they’re entitled to for the research and development work they’ve undertaken.
If your company is taking a risk by innovating, improving or developing a process, product or service then you can qualify for relief, profitable as well as loss-making businesses are able to claim under the scheme. Client funded R&D projects as well as projects undertaken internally can be included within a claim, and whilst grant income can limit the amount of R&D relief available grant funded expenditure can sometimes still be included within a claim, albeit often at a lower rate.
R&D tax credits are government incentives to encourage innovation amongst UK companies. The treasury are keen to foster further innovation, which has been behind a series of increases to the amount of relief available in recent years. Broadly speaking a profitable business can look to recoup up to 25p in the £1 and a loss-making business can recover up to 33p in the £1, but the exact level of relief you’re able to claim will depend on your individual circumstances.
It’s not to late to act, but time’s running out. If you’ve not claimed R&D tax relief for your period ending March 31st 2013 then speak to an R&D tax specialist today to see if you could be due a cash repayment or a sizeable reduction in your Corporation Tax liability.