Lack of resources ‘holding back’ R&D investment
Businesses aren’t investing in research and development because they lack the resources to make it happen, according to a survey by Lancashire-based accountants and business advisers Moore and Smalley.
Almost two thirds (63 per cent) of businesses questioned in the poll said they didn’t have the time or financial resources to make a serious commitment to R&D.
A quarter (25 per cent) of businesses claimed they didn’t believe there was enough of an incentive to invest in R&D, despite the generous tax reliefs available. Meanwhile, around one in ten (13 per cent) businesses believed they weren’t ‘high-tech’ enough to invest in R&D.
However, David Bennett, tax partner at Moore and Smalley, believes there’s never been a bigger incentive for SMEs to look at R&D.
David said: “The government introduced these tax reliefs in a bid to encourage and reward investment and innovation by UK businesses. However, there are still many companies out there who are unaware these incentives exist or are unfamiliar with how they work.
“For example, many businesses assume what they do isn’t high tech enough to be classed as research and development. But to qualify for R&D tax relief a new innovation doesn’t have to be the result of extensive cutting-edge research.
“It can be something as simple as making an improvement to a product so long as it involved resolving a technological uncertainty. Although routine improvements would not be covered, in practice the relief still extends to areas that many people do not initially think of as R&D.”
There are two R&D tax relief schemes available – the large company scheme and the small and medium-sized enterprise (SME) scheme – each with its own rules on the relief available.
For SMEs (including companies with fewer than 500 employees), the tax relief on allowable R&D costs is 225 per cent. This means that for each £100 of qualifying costs, a company could have the income on which corporation tax is paid reduced by an additional £125 on top of the £100 spent.
David added: “On the face of it these tax reliefs are quite complex, but do offer real incentives if businesses are prepared to explore them. Businesses should speak to their professional advisors to ensure they are maximising these opportunities to reduce their tax bill.”