A survey by accountants Baker Tilly revealed that only 15 per cent of the SMEs surveyed knew about R&D tax credits, despite the Government launching the scheme nearly 14 years ago.
Other tax incentive schemes also appeared to have a low profile, with only eight per cent knowing about the Seed Enterprise Investment Scheme (SEIS) and four per cent aware of the Patent Box.
R&D tax credits were first introduced in 2000-2001 to encourage greater R&D investment. Since then, the available tax breaks have become more generous and HMRC has expanded the way it interprets and applies the rules in order to provide greater stimulus for innovation in the economy.
HMRC reports show that most of the R&D tax relief claimed in 2011-12 was by large companies (£780 million) rather than SMEs (£420 million).
Only one tax incentive – Capital Allowances – was recognised by more than half of respondents (55 per cent) surveyed. The survey did find however, that once businesses knew about an incentive, they tended to use it, suggesting that knowledge was the main issue, rather than perceived scheme effectiveness.
George Bull, Tax Partner at Baker Tilly, said: "The survey backs up what we already suspected, that many UK SMEs are missing out on generous R&D tax incentives. There’s clearly an issue of awareness that the Government needs to address, but SMEs also need to take responsibility for finding out about R&D and other tax breaks on offer, in order to take advantage of all opportunities to grow.
"Anecdotal evidence suggests there is a perception that R&D refers to lab-based work only, whereas a whole range of innovative measures in SMEs can be classified as R&D."
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Susie Hughes © Shout99 2014