R&D (research and development) tax relief has proven to be a strong incentive in helping UK businesses become more innovative and strive to become world-class. The scheme, which enables companies investing in product or service improvements to apply for significant tax breaks, appears to be delivering value for money too.

A 2015 evaluation by HMRC suggested that for each £1 of tax foregone, businesses were spending between £1.53 and £2.35 on R&D activity.

R&D tax relief has led to the write-off of billions of pounds in tax payments for a wide cross section of companies, including many small businesses, but its popularity has also prompted greater scrutiny from the tax authorities. While the UK government remains committed to extending this measure to drive further innovation within business, companies applying for it can expect a tougher ride from HMRC in getting their claims approved going forward.

Most small businesses which invest in developing innovation will be well aware of R&D tax reliefs and the financial benefits this can deliver. Since the scheme was introduced by the government in 2000, there have been over 170,000 claims with a total of £16.5 billion in reliefs secured by UK companies.

Originally article published on SmallBusiness.co.uk

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