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Is Your Business Missing Out on Free Money?
 Many
businesses are unaware that they are
eligible for research and development (R&D)
tax credits; wrongly assuming that the
definition of R&D does not cover their
activities.
SMEs are still missing out on valuable research and development tax
credits, despite efforts from the tax
community to spread the word and actively
encourage them to apply, according to KPMG’s
latest survey of middle market companies.
The survey reveals that just 20 per cent of middle market companies
sampled felt they were sufficiently aware
and well-informed about the research and
development (“R&D”) tax credit scheme. And
of these, less than half had actually
applied.
Over half of the respondents who claimed they knew something about
R&D tax credits but did not possess a high
level of awareness, believed that this tax
relief was irrelevant to their industry.
David O’Keeffe, head of KPMG’s R&D tax credits team said:
“Companies are turning their backs on what
is effectively free money. Our findings
clearly demonstrate the widespread lack of
understanding of the huge breadth of the
definition of R&D in the tax legislation.
Forget the classic images of white coats and
test tubes, the vast majority of claims are
by companies outside the pharmaceutical
industry. R&D is by no means just about blue
sky research.”
Furthermore, of the 20 percent claiming high levels of awareness,
around 70 percent were unaware that, as of
31 March next year, the historic time period
over which R&D tax credits can be claimed
will reduce from the current six years to
just two years. Claims for accounting
periods ending on or before 31 March 2006
must be in before the end of March next
year.
David O’Keeffe added: “Although March next year sounds like it’s a
long way off, in our experience it can take
several months to put a claim together. If
companies don’t take steps soon to ensure
these claims are submitted in time, the
opportunity will be lost forever.”
The process of making an R&D tax credits claim has a reputation for
being complex and, indeed, the survey showed
that of those respondents that had been
through the process, only one in three said
they found the preparation process easy.
More encouragingly though, half subsequently
found that it was generally easy to get the
claim agreed by Her Majesty’s Revenue and
Customs. Four out of five of these
respondents that had made claims enlisted
the assistance of outside advisers to
compile the submission and the same
proportion agreed that they benefited from
this as a result.
David O’Keeffe concluded: “Time’s not up yet for companies to get
the maximum benefit from these R&D tax
credits but the clock is certainly ticking.
SMEs should not assume that they don’t
qualify and if they do seek to make a claim
then professional advice can make the
process considerably easier.”
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