Partner Article

Firms missing ‘R&D’ tax breaks, says Mitchell Charlesworth

Accountancy firm Mitchell Charlesworth is urging Cheshire firms to avoid missing out on valuable Research & Development (R&D) tax breaks, with an estimated £1billion of unclaimed tax credits every year.

Mitchell Charlesworth has offices in Chester, Warrington and Widnes.

The firm has recently helped innovative clients recover substantial sums in R&D tax credits. However, Mitchell Charlesworth tax partner Tim Adcock is encouraging more firms to seek professional advice on ‘qualifying’ projects to avoid missing out on potentially large savings.

He said the firm is witnessing a rise in demand for R&D tax work as a result of educating its existing client base on the eligibility criteria. However, he said there are still a huge number of firms who either dismiss or unintentionally overlook their rightful claim as they do not realise they are innovating. The average annual SME claim within the UK remains under £50,000.

“We often find when discussing research and development that firms are misinformed as to what it actually constitutes,” said Mr Adcock. “Many believe R&D remains exclusive to large businesses and white-coated lab technicians.

“The reality is that any company investing in the improvement of a product or service, using qualified staff and appropriate project controls may be eligible to claim R&D tax credits. We have advised clients across a broad variety of sectors from IT, digital and creative, through to manufacturers, engineers and insurance firms who’ve been successful in securing tax credits. Firms who we believe to be particularly underestimating their potential to harness R&D tax savings sit within the creative sector.”

Introduced in 2000, the R&D Tax Relief Scheme was designed to encourage innovation and global competitiveness. HMRC’s guidance on R&D tax relief states that companies can only claim for relief if an R&D project seeks to achieve an advance in overall knowledge or capability in a field of science or technology. The project must relate to the company’s trade - either an existing one, or one that they intend to start up, depending upon the R&D findings.

“In each case we write to HMRC to outline the specific nature of R&D work for each individual business before applying the tax credits,” he said. “We can do this with minimal fuss to establish if there is a basis for a claim.

“More often, we’re hearing that R & D activities within companies is either not being recognised as such, or it is overlooked as it spans different roles across multiple departments. It is often the case that the project requires involvement from many people and is a collaborative operation. This perhaps explains why individuals within businesses do not always take ownership of R&D work, and are consequently less aware of the potential financial benefits. Companies shouldn’t be daunted by seeking professional advice. We have guided many clients through this process which more often than not, is straightforward.”

For an informal chat about R&D, and to find out if your business is eligible for the relief, please contact Tax Partner Tim Adcock on Tim.Adcock@mitchellcharlesworth.co.uk or call 0151 255 2300.

This was posted in Bdaily's Members' News section by Sam Pinnington .