There are over 6 million small and medium businesses in the UK. So it’s no surprise that small businesses submitted the majority of R&D tax claims last year. Additionally, this year the number of claims has increased once again
What is considered a small business?
- Less annual revenue- small businesses often have small scale operations. Therefore, less people are involved in company projects . They will still be profitable but the cash flow is monitored more closely.
- Sole proprietorship or partnership- Small businesses are usually managed by few individuals a significant implication when it comes to tax relief is that the businesses earnings and expenditures can be found within the owner’s tax returns.
- Limited reach- small businesses operate out of one location which can even be the owners home. Due to these businesses often serve their local area and do not branch out to other parts of the country
HMRC’S guidelines specify the definition of the size of businesses they also inform you on which schemes to apply for depending on your business category for all HMRC’s guidelines on R&D relief for SMEs can be viewed on this link.
What is an R&D Tax Credit?
R&D credits create a reduction in corporation tax that a business is liable for.
The main benefit of the governments tax incentive scheme comes in the form of corporation tax reduction. However credits are also available for loss making companies the SME scheme allows them to surrender their losses. In turn they receive a cash credit worth 14.5% of the total loss surrendered.
What are the effects of R&D tax credits on small businesses?
When it comes to a small business R&D will often focus predominantly on improving products and creating new ones, some positive influences include:
- R&D becomes more accessible
- It’s a source of short-term funding
- Complementary to other forms of government funding
Who We Are:
Swanson Reed is one of the UK’s leading R&D Tax Relief consultancies. We manage all facets of the SR&ED tax credit program, from claim preparation and audit compliance to claim disputes.
If you would like to find out more about how your business could benefit from R&D Tax Credit, contact a Swanson Reed R&D Tax Advisor today.