There is encouraging news for small and medium enterprises (SMEs). Research and Development (R&D) tax credits are working well. In fact, they are getting more and more attractive. Originally introduced in 2000 with the intent of incentivizing innovation, the R&D tax credits scheme is going from strength to strength with the value of claims going upward of £380 million this year.
According to official HMRC figures:
- R&D tax credits have seen a 27% year-on-year increase with SME’s claiming 23% and 4% large corporations making the claim
- The total number of claims rose from 16,000 in 2012-13 to 20,000
The key sectors taking advantage of the tax provisions are:
- Manufacturing businesses claimed 27%
- Professional, scientific and technical firms claimed 24%
- Information and communication specialists claimed 20%
The dramatic rise is partially being credited to companies like Jumpstart who are increasing awareness of the benefits of R&D tax relief. Plus the government’s amendments to the scheme to get more businesses involved. For instance, in 2012, the government increased the rate of enhanced expenditure for SMEs from 100% to 125%. What this means is companies can claim a tax relief on 225% of their eligible expenditure. For businesses that didn’t previously qualify due to lower levels of R&D activity, the government removed the £10,000 minimum R&D expenditure limit so they could benefit from the scheme too.
However, it’s astonishing how the tax provision is being underutilized by businesses in the construction industry. It’s sad that large corporations with in-house tax departments are accessing billions of pounds in incentives while small businesses in construction are not even aware that they qualify. Many companies are missing out on large sums because of a lack of understanding of the eligibility criteria.
We think this is a shame because these tax credits are available to a wide range of innovative engineering and materials companies that support the UK construction industry – including manufacturers of concrete, damp proof coursing, tanking, steelwork, render systems, insulation systems, cladding panels, glazing, fixings, glues and paints and more. Business that surpass industry standards for energy efficient homes or homes that produce less CO2 emissions are also eligible. Moreover, activities that include the creation of buildings that are more resistant to earthquakes, storms or other acts of nature also qualify.
Except construction, the whole of UK PLCs are benefitting across various regions. Stats for 2013-14 show an increase in uptake with London, the South East and East of England accounting for nearly half (46%) of all claims and 64% of the total amount claimed!
Alan McCappin, Practice Manager at Bradleys Accountants, said, “Everybody loves the R&D tax credits. We’ve seen a substantial rise in claims from the London and Kent areas and the future looks full of potential. The rewards are there for businesses that are able to identify whether they qualify for the relief.”