More than eight in 10 engineering and building firms could be eligible for Research and Development (R&D) tax relief on new products and services, but only 39% of them have ever claimed, says specialist tax relief firm Catax (www.catax.com
Its research also shows that 83% of businesses in these sectors have developed new products or business processes in the past two years and could be in line for valuable R&D tax relief that the government provides to encourage innovation.
Catax also says that while 80% of firms are aware of R&D tax relief, only four in 10 report ever claiming it — either because they do not think they qualify or because they incorrectly believe that it is expensive.
The national average across all sectors for the number of firms that have ever claimed is 36.8%, roughly in line
with the building and engineering sector, whose executives massively underestimate the value of the average SME R&D tax relief.
According to a Censuswide survey, executives believe the average value to be just £22,989, when the true figure is £46,000 for firms in all sectors nation-wide.
Those engineering and building firms that have undertaken R&D over the past two years report spending £292,001 on average; moreover, claims can be backdated to the last two years.
Catax CEO Mark Tighe said: “The engineering and building sectors could be squandering tens of millions of pounds a year.
"The situation is that while the majority of firms in the industry could be eligible to claim, only a minority do so.
"In a world of tight margins, this situation has got to change, and cost benefit doesn’t come into it
because most good R&D tax relief firms will work on a commission basis.
"It is important firms recognise that R&D is not all about lab coats and multi-national companies; moreover, the R&D doesn’t even have to have been successful to qualify.”
Catax says R&D tax credits can help to reduce a limited company’s corporation tax bill or be claimed as a cash sum reimbursement from the HMRC.
R&D tax relief only applies to those businesses that are liable for corporation tax, including businesses making a loss.