SMEs miss R&D tax breaks

Small businesses are missing out on millions of pounds of tax relief designed to encourage research and development in the UK, a report suggests.

Less than half (45 per cent) of eligible small and medium-sized enterprises (SMEs) are taking advantage of the tax breaks, and almost a quarter (24 per cent) of respondents said they are unaware the incentives exist, according to research by Deloitte.

David Cobb, head of R&D tax services at Deloitte, said in a statement it's ironic that businesses with the most to gain are missing out.

Any company developing new products, materials, processes or services could be eligible for the tax relief, Cobb added.

R&D tax incentives work by reducing corporation tax payable for tax paying companies.

The majority (80 per cent) of companies that have claimed no tax breaks employ fewer than 50 technical staff, which suggests the scheme is failing to reach SMEs.

The research, which questioned 563 companies, found regional differences in the number of SMEs making claims.

Less than 10 per cent of the businesses questioned in the Midlands are applying for tax relief, with only one-third of those in the North East and South West doing so. Companies in London, Northern Ireland and Scotland appear to be the most switched on, with 55 per cent of eligible companies making a claim.

Cobb said the process of applying for relief is fairly straightforward.