Firms urged to explore R&D tax relief opportunities
Mar 23 2009 by Alun Thorne, Birmingham Post
In an environment where cash flow is key to survival, one of the region’s leading R&D specialists says West Midlands manufacturers could be missing out on their share of a multi-million pound cash pot from the Government.
James Stephens, a senior manager in Ernst & Young’s corporate tax team, said: “Many of the region’s manufacturers could be eligible to a pot of over £300million of available R&D tax relief but may not realise that the improvements they have made to their businesses qualify.
“The definition of R&D for tax purposes is much wider than is often believed and there may be businesses out there which aren’t aware that the product or process improvements they are implementing can be claimed for R&D.
“Experience has shown that ‘R&D’ for tax purposes extends beyond traditional activities taking place in R&D laboratories and development centres. Companies do not just have to be undertaking ‘blue sky’ research and ‘new product’ development to make R&D tax claims. Wider business areas also often contain R&D activities including manufacturing operations and assembly processes, which are particularly pertinent to the West Midlands.”
Mr Stephens continues by saying that following legislative changes in August of last year, the size and scope of businesses which can make a claim for R&D relief has been extended.
“Under legislative changes, which came into effect at the start of August, these tax breaks have now been extended and have doubled the number of business that qualify and significantly increased the amount of relief available.”
Companies with up to 500 employees and a balance sheet of up to €86million will now potentially be eligible for 175 per cent tax relief on their R&D expenditure. This has increased from a criterion of 250 employees and a rate of 150 per cent.
The relief available to larger companies has also been increased.
“As such, now more than ever before, it is vital that West Midlands businesses carefully assess all aspects of their business activities to ensure that they aren’t missing out on potentially thousands of pounds of financial support in the form of tax credits”, he added.
Mr Stephens continued by saying that if businesses are in doubt about their eligibility, they should seek the help of specialist advisors as the tax breaks are significant.
“At a time when many of the West Midlands corporates are facing difficult trading conditions and are feeling the pinch of the credit crunch, the extension of the R&D tax credits will provide a welcome boost.
Companies should be looking closely at all aspects of their business and seeking the help of specialist advisors to ensure that they aren’t missing out on opportunities to apply for these valuable tax breaks,” he said.
