How can small businesses be supported with their R&D tax relief claims?

While big innovative businesses draw headlines with the amount of work they conduct and the benefits they feel from R&D tax relief claims, smaller businesses may also benefit from submitting claims.

Accountants should understand the challenges that may be faced by small businesses when compiling an R&D tax relief claim and adjust advice accordingly.

As such, we are here to elaborate on how to help small businesses approach the process so that they, too, can benefit from vital funds.

What challenges do small businesses face when making R&D tax relief claims?

With small businesses, there is a question as to whether they can handle the administrative tasks associated with R&D tax relief better or worse than larger companies.

On the one hand, a small business may have the dynamism to know what every employee is doing and be able to get detailed feedback without much delay.

On the other hand, taking the time to record aspects of R&D work that help support an R&D tax relief claim could consume time and resources that would be better served elsewhere.

It is important to understand the operational efficiency of a small business when engaging with it for an R&D tax relief claim.

The other major challenge faced by small businesses is that they are less likely to be industry leaders or play host to them.

The expertise of the competent professional involved in the R&D can help HMRC approve the claim.

While it is not impossible for an experienced, competent professional to be present in a small business, they are much more likely to be found at larger businesses, where they will have established a name for themselves.

Where the competent professional may have been quietly working away in their sector for many years, it will be necessary to demonstrate effectively to HMRC why this individual would not immediately know how to resolve the uncertainty that the project tackled.

Small businesses should brace themselves for additional scrutiny from HMRC, given that it is smaller claims that have historically been the least compliant.

The potential lack of time and resources to collate evidence, combined with the additional scrutiny to make R&D tax relief claims more challenging for small businesses.

How can small businesses approach R&D tax relief claims more effectively?

Understanding the way that HMRC reviews R&D tax relief claims is a vital part of helping small businesses submit maximised, compliant claims.

Where possible, small businesses should work to enhance their record-keeping processes to ensure that any questions HMRC may have can be answered.

This will also help with the compilation of figures and the creation of the technical narrative, both of which serve to produce a stronger R&D tax relief claim.

Small businesses can benefit from R&D tax relief claims, as the additional funding can help keep them competitive while trying to resolve uncertainty in sectors that are often dominated by larger companies.

Of course, small businesses should be made aware that some R&D tax relief claims may not be worth filing, even if they are eligible, if the amount that would be recovered is too low.

This is something that can be determined through discussions with the small business, as they should have a sense of the qualifying expenditure.

As R&D tax consultants, we work to make the R&D tax relief scheme approachable to innovative businesses and accountants.

This means removing barriers that keep valid claims out and showing the possibility of making valid claims for businesses that may have incorrectly believed it is not worth the time or energy.If you want to better support innovative small businesses, speak to our team today!

Tom Mason