As with every announcement of this kind there were winners and losers. We are pleased to see that it was largely good news for innovative companies, but does it go far enough?
Enhancements to R&D tax credits
The headline rate of R&D tax credits rises for both the SMEs and large company schemes. For large companies the Above the Line (ATL) Credit will rise from 10% to 11% while the SME scheme increases from 225% to 230%.
It was reassuring, also, to hear the Shadow-Chancellor endorse this. There is the feeling that Westminster is playing the right mood music for companies seeking to grow through innovation. And equally important, this pattern of enhancements to R&D tax credit schemes helps keep them in the news headlines. This should help raise awareness.
Raising awareness is key
And for ForrestBrown, this is one of the most crucial issues surrounding R&D tax credits. Many exciting, creative companies simply aren’t aware that this tax boost exists. Or wrongly assume they will not qualify. Take ForrestBrown’s own backyard – the South West – where only 1,265 claims were made in 2012/13 (representing just 8% of the UK claims).
For this reason, although generous with the current rates, some feel that the government is still not going far enough. Companies should be queuing up to get their claims in. The answer could be even more generous schemes, or a concerted campaign to raise awareness.
There was a nod from the Chancellor that they understand this. It was announced that there will be a consultation in January 2015 to explore the issues faced by smaller businesses when claiming R&D Tax Credits. Also announced was an advanced assurance scheme to give small businesses greater confidence that there claims are viable, before they invest in pursuing them.
There was one point of caution. The government stated that they would look to restrict qualifying expenditure on consumables which are incorporated into products that are then sold. We expect this to predominantly affect manufacturing companies claiming R&D tax relief. The reach could be far wider than that – whether intended or not. Only time will tell! The change comes into force 1st April 2015, and HMRC have yet to release their guidance on this point.
It’s never been a better time to explore R&D tax credits
For all companies who are taking on risk in creating or improving products or processes, speak to an R&D tax adviser. If you are improving or creating and there is uncertainty in the outcome, you may well qualify for these valuable tax credits. You can claim retrospectively over the current accounting period and the previous one. So every time you reach a year-end without claiming, you potentially lose out on a year’s worth R&D Tax Credits – to help put that into perspective, our typical client receives over £46,000 in R&D tax relief annually…
Our message to UK companies is simple: explore R&D tax credits urgently. You don’t need to employ scientists to qualify, no sector is excluded, and qualifying innovation could be staring you in the face or hiding in some back-office function. Call 0117 926 9022 to speak to an expert.
And to the government: good work, but more please. Let’s raise the profile and value of R&D tax credits and reward innovation in the UK economy.