Businesses losing out on R&D tax relief

Companies could be losing out on substantial tax savings if they don’t claim research and development tax relief, according to experts at Rochdale accountancy firm, Tenon.

SMEs which are involved in Research and Development, or have R&D functions, can currently deduct up to 150 per cent of their qualifying spend and large companies 125 per cent, but these figures will increase to 175 per cent and 130 per cent respectively, with the increase for large companies due to take effect from 1 April 2008.

However, the amount of time by which claims can be backdated has been decreased, meaning businesses need to seek advice as soon as possible.

Vanessa Hamer, director in the Rochdale office of Tenon, said: “Although the amount businesses can claim is going up, the backdating period has decreased dramatically from six years to just two. Many companies will therefore have already missed out on significant tax savings through not making claims in time.

“Because of this, those still waiting to claim relief must act now to make sure they get what they’re entitled to. And research and development isn’t restricted to laboratories – anything that you’ve invested in to improve processes or develop new products is potentially eligible.

“Small businesses in particular need to be aware of where they are investing in research and development, as for them it could mean a cash payment – for larger businesses, it will be a substantial deduction from their tax bill. But whatever the size of the company, you need to take action now to avoid missing out.”