BUSINESS SURGERY: Paul Donno, of Jacobs Allen, asks ‘Is your business losing out on R&D tax relief?’

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Many businesses do not think about research and development (R&D) as an expense of their business and are losing out on some valuable tax relief.

For small or medium-sized enterprises; businesses with less than 500 employees and either an annual turnover not exceeding 50 million Euros or a balance sheet not exceeding 43 million Euros the relief for R&D is 225 per cent and in some cases can result in a repayable credit.

The Governments scheme on R&D tax credits is designed to encourage innovation and it is possible to reclaim significant amounts of money. But do you know if you qualify and how to put a claim in?

R&D can include not only the design of products, services and software involving new technology but also substantially improving existing products and services. Even if the project does not work you may still be able to claim for R&D tax credits.

The most important thing is that you must be able to demonstrate to HMRC that the product or service is truly innovative, cutting edge and, at a technological level, an advance on what is currently available in the market.

The industry that appears to be making many claims for R&D is the food industry, followed closely by software and games development. For example, designing a new algorithm or system architecture that breaks new ground in the industry sector could be eligible for R&D.

A good example of R&D tax relief is the F1 teams, every year they are designing and developing new ways to make the car faster, lighter, more economical etc and this would result in claims for many areas of the business.

It is estimated that £1 billion of R&D tax relief is going unclaimed every year! That is a staggering amount and the main reason for this is that businesses do not recognise when they are being innovative.

We would recommend that you look at your business and see if you have developed new technology that is innovative in changing your business or industry sector and ask your accountant to look at this area for you.

PAUL DONNO - ask@jacobsallen.co.uk