January 8th 2014

Baker Tilly survey reveals low awareness of tax incentives among SMEs

Claims for R&D tax relief lowest in the North East

A survey by Baker Tilly has found low awareness and usage of some tax incentives by small and medium-sized businesses which could be hampering their prospects for growth.

Only 15% of the 750 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 8% knowing about the Seed Enterprise Investment Scheme (SEIS) and 4% 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.

The latest figures from HMRC show that most of the R&D tax relief claimed in 2011-12 was by large companies (£780m) rather than SMEs (£420m). In addition, SMEs in the North East only filed 325 claims for R&D tax relief worth £11m in the year 2011-12, just three per cent of the UK total of 9,875 claims.

According to the survey, only one tax incentive – Capital Allowances – was recognised by more than half of respondents (55%) 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. 

Steve Railton, Managing Partner at the Newcastle office of Baker Tilly North East said:

‘Our survey supports what we already suspected that many UK SMEs are missing out on generous R&D tax incentives. There also appears to be a particular concern in the North East, which has the lowest level of claims for R&D tax relief in England. The Government certainly needs to do more to raise awareness, but firms in the region should also be asking more questions about the tax breaks on offer.’