HMRC isn’t instantly recognised as an organisation that gives back money, but the fact is tens of millions of pounds are given back every year in R&D tax credits.
Most businesses aren’t aware they’re eligible. There’s an assumption R&D is all about white coats finding cures for diseases, software programmers and games developers, or the inventor creating the next generation vacuum cleaner.
But in reality, it’s just as relevant for today’s butcher, baker and candlestick maker.
Or, as CEO of R&D tax credit experts Jumpstart, Brian Williamson, likes to call them: cows, cakes and cast iron.
He says it’s easier to say which businesses aren’t eligible than to list the ones who are, and that’s retail, real estate, financial services and hospitality, which tend to use technology rather than develop it.
“If you transform the state of something, from one state to another, you’re probably eligible,” says Williamson. He recalls an example of a factory trying to produce a low-fat biscuit and discovering that biscuits crumble without the fat content. They had to test new recipes to be able to bake low-fat biscuits that held their shape, so they were eligible.
The average claim for SMEs – and you can claim retrospectively for two years – is about £50,000 in the first tranche. Over three years, the average is somewhere in the region of £80-100,000. For businesses turning over in excess of £10m the claim is £200-300,000.
It can make a significant difference to a business being cash positive or negative, and have a real impact on the bottom line. Yet there is still a lack of awareness about R&D tax credits, particularly in Scotland, where companies account for just 5.4 per cent of total R&D tax relief claims across the UK. This is in stark contrast to London (19.1 per cent) and the South East of England (17.9 per cent).
Ballantine Bo’ness Iron Co consistently looks for new opportunities to adapt to market changes, constantly monitoring production processes to make sure they are in line with ever-changing customer demands.
Projects like these were seen as routine, rather than R&D, so management didn’t consider tax credits, but they recovered a hugely important five-figure lump sum that the company is now reinvesting into new engineering and moulding projects.
Another example is the Hebridean Seaweed Company, which processes raw seaweed into high quality and environmentally friendly organic seaweed products.
“We weren’t even aware of R&D tax credits until our accountants enlightened us,” said CEO Martin MacLeod.
“We frequently carry out experiments in our lab to find new uses for the seaweed we harvest, and we now realise the importance of not only having a comprehensive knowledge of the legislation, but also being able to apply it.”
“Innovation is key to Scotland’s success in an intensely competitive global business environment and R&D tax reliefs are a vital element.”
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