Finally, loss-making SMEs have something to smile about.
Investing in cutting edge science, technology and engineering can be a thankless task, at least until you have established yourself and start turning a profit. So it’s good to know that loss-making SMEs have a champion in the R&D tax relief programme.
BACK IN 2014, CHANCELLOR GEORGE OSBORNE ANNOUNCED AN INCREASE IN THE RATE OF SURRENDER OF R&D LOSSES FOR A TAX CREDIT FOR LOSS-MAKING SMES FROM 11% TO 14.5%, THUS HIGHLIGHTING THE GOVERNMENT’S WILLINGNESS TO SUPPORT THE ‘HARDEST TO HELP’ GROUPS.
What does that mean for you if you’re a loss-making SME?
Well in a nutshell more money! If you're numerically minded, follow the example below to discover how loss-making SMEs could be making claims up to on third larger on a like-for-like basis. If not, you might want to skip the next paragraph and go straight to what you could do with the dosh.
Okay, so imagine you're an SME with losses of £100,000 and £100,000 of eligible R&D spend, according to HMRC's definition of qualifying R&D activity. Under the UK Government's R&D tax relief scheme, SMEs can deduct up to 230% of qualifying expenditure when calculating their profits/loss position for tax purposes, supercharging the R&D expenditure to £230,000. Not come the interesting bit... if the company chose to surrender its R&D related losses for a payable tax credit from HMRC, as it's perfectly entitled to do under the scheme, it would receive 14.5% of its adjusted losses - a very respectable £33,350!
An overview of the scheme
This extra money can be used for all kinds of things – from reinvesting in further development to funding expansion plans, even just easing the cash flow.
Complicated though the scheme’s legislation undoubtedly is, Scott Henderson of Jumpstart, the UK’s leading technical R&D tax relief specialist, says: “I would urge all loss-making SMEs – whether they think they qualify for the scheme or not – to look into this without delay. It doesn’t cost you a penny to get an expert opinion, but could be worth thousands of pounds.”
With the UK Government providing additional incentives for small and start-up businesses to invest in R&D and Jumpstart doing everything in its power to help companies claim the R&D tax relief they’re entitled to, the present is looking pretty bright for loss-making SMEs and UK innovation generally, never mind the future.
To discover how much easier life – and particularly R&D tax relief claims – can be with the right support, visit www.jumpstartuk.co.uk, email helpinghand@jumpstartuk.co.uk or call 0330 311 6226.
