Millions in R&D tax relief overlooked by SMEs

Laurence Bard, tax partner and R&D specialist at Smith & Williamson says that many businesses are investing large sums into developing IT systems, for example, but the firms are unaware that they could qualify for R&D breaks.

'Expenditure on systems development is widespread and companies are missing out. Following further increases, cash repayments of up to 33 per cent of qualifying R&D expenditure can now be claimed and this money feeds through to the current year, helping to boost a business’s profits,' adds Bard. 

The government has confirmed its commitment to R&D tax credits in a new report and this, combined with a slight further increase in the amount which businesses can reclaim, is good news for organisations in any sector, adds Bard.

Subcontractors undertaking work for other businesses are also eligible for the tax credits.

According to the report by HMRC, £1.4 billion was claimed in tax relief on R&D from April 2012 to April 2013, the most recent year for which information is available.

Claims must be submitted no later than two years after the end of the year in which the money was spent. For example, businesses with an accounting year end of April 30th have until April 30th 2015 to submit claims relating to 2013.

Tax specialists at Smith & Williamson analysed the figures and noted sector and regional imbalances.

Bard explains, 'The number of claims by SMEs in the finance and insurance, construction, real estate, arts and health sectors are particularly low. However, where successful claims have been made by firms in these sectors, the average sums received have been among the highest.

'We therefore believe there could be considerable scope for businesses in these sectors to claim R&D tax credits.'

Two thirds of the total amount claimed came from companies registered in London, the South East or the East of England.

Loss-making SME businesses are now eligible for a repayment of up to 33 per cent of qualifying expenditure, whereas those which are in-profit can claim a tax credit of 46 per cent of qualifying expenses. 

Bard adds, 'The potential for R&D tax claims on IT development arises, as software is specifically recognised by the tax authorities as technology, and its development is often difficult and uncertain.'

The resolution of technological uncertainty in respect of software can present significant opportunities to claim R&D relief, Bard continues. 'If your staff are experienced professionals working in the field, and they consider their development assignments to be uncertain as to whether or how results can be achieved, you should look into the potential for an R&D tax claim.

'It doesn’t matter if competitors have already found a solution – unless they have published the mechanisms behind their discoveries.'

Eligibility

Small and medium-sized enterprises (SMEs) taking on work as sub-contractors are also eligible. Only 575 sub-contractors claimed in the 2012/13 tax year, suggesting there is little awareness of the opportunities.

SMEs can benefit from an enhanced rate of R&D tax credits compared to larger businesses. To qualify, SMEs must employ fewer than 500 people, and have either an annual turnover of no more than €100 million or a balance sheet total not exceeding €86 million.

Smith & Williamson has set up an R&D calculator which is available here and is free of charge. It provides businesses with an immediate indication of how much they can claim in R&D tax credits.

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5 social business trends companies can't afford to ignore

If there is one thing that has, more than any other, fundamentally changed how businesses communicate with their customers, it is the group of technologies collectively classified as Web 2.0.

It’s difficult to pinpoint the one trend or technology that has had the most impact on business in the past couple of years. Mobile computing, cloud computing, the “as-a-service” model—these have all transformed how businesses operate. But Web 2.0 is certainly high up on the list.

These technologies, which include social communities like Facebook, social publishing platforms like Twitter, and digital sharing platforms like YouTube, have transformed company-consumer relationships. These relationships continue to evolve as new interactive technologies become available and consumer preferences change.

Here are five current social business trends that companies can’t afford to ignore.

1. Social media is starting to be incorporated into business’s marketing strategies

2. Visual media is being used more often3. Analytics and social media are coming together to provide businesses with valuable new insights4. Social engagement is focusing less on the brand, more on the individual5. Businesses’ use of social media becoming more interactive

More than 90 per cent of marketers already use social media for their business, but not all of them are doing so effectively. In many cases this is because they don’t have a defined social media strategy in place. However, with more and more customer engagement happening on social networks and publishing platforms, companies are starting to look more closely at how social media is being used and to incorporate it into their overall marketing strategies.

When businesses analyse the click-throughs, shares, and likes that their social content generates, there is one trend that never fails to stand out—images and videos are shared much more often than any other type of content. With the cost of video production declining and the ease with which images and videos can be distributed across the Internet increasing, the use of these visual media is rising rapidly.

Social media generates an unprecedented amount of behavioural data, but until recently businesses did not have reliable ways of extracting knowledge out of the data. With the rise of social marketing analytics tools, businesses can now mine social data for valuable insights into customer behaviour that they can use to power their decision making.

When brands first started using social platforms like Facebook and Twitter, they often used those platforms the same way they used television advertising: as a way to broadcast their brand message. As a result, many brands saw their followers flee in droves. The lesson was that when people use social networks, they want to see information that is interesting and valuable to them, not just advertisements. Brands that responded by better addressing consumers’ wants and needs saw their followers return.

The next phase in this evolution is for brands to engage consumers on a more individual level. This trend is being driven both by analytics, which allow brands to get better insight into particular customers, and social marketing tools that enable personalisation. For example, when users are signed in, Google uses their Google+ activity to personalise their search results, a feature that businesses can use to their advantage to put the right content in front of the right people.

As another way to respond to consumers’ needs, businesses are using social media more for conversations rather than for brand messaging. This strategy can pay off considerably by turning customers into brand promoters. According to this CeBIT infographic, “71 per cent of consumers that receive a quick brand response on social media are likely to recommend that brand do others.”

Social media is one of the most influential channels companies are using today to reach and engage their customer base. These five social business trends represent the top new practices emerging and expanding today.

Rosemary Brown is a business and market researcher with over 20 years of experience and is currently conducting experiments with web-based help desk tools like ProProfs Knowledge Base Software. 

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