As an accountant, you have a responsibility to help your clients maximise their financial opportunities, no matter the size of their organisation.
However, many small businesses are missing out on valuable R&D tax relief because they mistakenly believe it’s only for large corporations or tech firms.
Could your clients be unknowingly eligible for this relief?
Debunking the myths – R&D is for more than just scientists
A widespread misconception is that R&D tax relief is only available to laboratories, scientists, or tech startups.
However, HMRC’s definition of R&D is much broader.
Whether it’s a manufacturer experimenting with new materials, a food producer refining recipes, or a software company enhancing its systems, R&D activity takes many forms.
To qualify for the incentive, projects must meet the following criteria:
- They must make or seek an advancement in science and technology.
- They must not be easily worked out by another professional in the field.
- They must contribute to the overall knowledge of the industry.
Even if a project isn’t successful, costs incurred in the attempt may still be eligible for relief.
How R&D tax relief benefits SMEs
The numbers speak for themselves. For accounting periods beginning before 1 April 2024, qualifying SMEs can claim an enhanced 186 per cent deduction on qualifying R&D expenditure and a payable credit if they are loss-making.
For periods starting after this date, SMEs must apply under the merged scheme, which offers a 20 per cent payable credit, resulting in a total post-tax benefit of up to 16.2 per cent.
However, loss-making and R&D-intensive SMEs will still have access to the existing 130 per cent deduction and a credit worth up to 14.5 per cent of their loss.
This relief can provide much-needed cash flow for small businesses operating on tight margins, helping them invest in growth, innovation, and resilience, so it is not something you or your clients should overlook.
Helping your small business clients benefit from R&D tax relief
Many small business owners may not even realise they qualify for R&D tax relief, meaning they might not think to share relevant information with their accountants.
Even if you are unsure what kind of projects your clients are working on – past, present, or future – educating them on R&D eligibility could open up conversations about opportunities for additional tax relief.
At randd uk, we simplify the claims process, ensuring businesses receive the maximum benefit with minimal effort.
Need assistance educating your clients on the benefits of R&D tax relief? Contact us today!
