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Consider tax relief ahead of expensive business loans, experts urge

by LLB Finance Reporter
20th Jun 22 8:28 am

Grants, loans and tax credits, there are a raft of measures that can help SMEs to navigate the current economic crisis and continue to scale up their businesses even in uncertain times.

Yet as HSBC announces a further £15billion lending fund for small businesses and with the UK Government poised to announce £3billion recovery funds for small businesses, one expert has called for business owners to first investigate if they are eligible for tax credits through a Government-backed scheme that rewards for innovation.

Mark Joyner of Research & Development Specialists LTD (RDS), an R&D expert firm based in the North of England, believes that there is a better way for businesses to fuel their expansion plans without getting into debt and grappling with costly interest charges attached to business loan repayments.

“HSBC says its most recently announced business development fund is part of a commitment to help businesses innovate and grow at home and internationally. That’s exactly what the HMRC R&D Tax Incentive was set up to do,” explains Mark.

“The average claim for tax credits for research and development stands at around £53,000. That’s a tax free, interest free cash injection into your business which can be utilised however you like. It’s a brilliant way for businesses to remain operating debt-free whether that’s to ride out the storm or activate expansion plans.”

“For some businesses during the pandemic, R&D tax credits literally kept the doors open and it could do the same thing now for businesses struggling with rising fuel, energy and cost of living price hikes. For others, it’s about reinvestment, expanding into new areas or finding ways to make a business more profitable.

“Whatever the money is used for, it certainly has to be worth a conversation to see if your business is eligible before taking on additional debt at a time when the economic outlook is far from certain.”

What is the R&D Tax Incentive?

Research and development (R&D) tax credits are a valuable Government incentive that rewards UK businesses for investing in innovation. Any UK limited business can claim. There are no restrictions on the type or size of business although there are different types of R&D scheme depending on whether you fit HMRC’s guide as being an SME or large company. Eligibility is focussed on the research project. Typically, an R&D claim can be submitted for a business’s current and previous financial year. It’s thought that 97% of companies eligible for R&D tax credits are not currently engaged with the scheme, despite there being huge financial rewards.

Explaining more about the lack of take up and how to find out if your business is eligible, Mark continued, “There’s a real lack of awareness around R&D tax credits. Most of the people we speak to either are not aware of the scheme, or don’t think it’s for them, but very often we find businesses are already doing research and development without even realising.

“It will take our experts as little as quarter of an hour to ascertain if a company has grounds to receive tax credits. That’s the time it takes to make and drink a coffee and we’ve had companies receive six-figure sums in return for that time. That’s fifteen minutes or a coffee break well spent in my book.”

And there could be even more good news for those looking to scale-up by creating bespoke products and services or streamlining internal processes with tailormade IT solutions.

Mark added, “For any businesses looking to reinvest and continue their research and development journey, we can also advise businesses how to structure any future projects in order to maximise the amount they can include in an R&D claim.”

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