Plans to make R & D claims easier for small businesses

The Government has launched a new plan outlining how it proposes to make it easier for small businesses investing in research and development (R & D) to claim tax relief. Small and Medium Enterprises (SMEs) accounted for over 80% of all R & D claims in 2013-14, an increase of 19%.

The two-year plan is a response to an HMRC consultation on R & D, and aims to increase take-up of R & D tax relief through raising awareness of the relief among small businesses, as well as making it easier for them to make a claim.

R & D tax relief rewards companies for investment in research and development through either an enhanced deduction of corporation tax or repayable tax credit.

The Plan 

The plan, ‘Making R & D Easier: HMRC’s plan for small business R & D tax relief’, sets out the following details:

  • From November, small companies (those with a turnover under £2 million and fewer than 50 employees) will be able to seek advance assurance on R & D tax relief. This will give them greater certainty and enable them to plan their finances effectively.
  • HMRC will explore ways to improve its communication around R & D tax relief, including looking at ways to use data and work with other Government agencies to identify companies that have carried out R & D but have not claimed relief.
  • Interactive guidance will be developed with stakeholder involvement

An HMRC evaluation on R & D showed that for each £1 of tax foregone by R & D tax relief, there was between £1.53 and £2.35 of additional R & D investment. Given these statistics, the Government is keen for more small businesses to take advantage of the reliefs available.