The vast majority of businesses do not know about research and development (R&D) tax credits, accountancy firm Baker Tilly says.
In a survey of 750 small and medium-sized companies (SMEs), the 14 year-old government scheme was found wanting due to a lack of awareness.
It has also been found that most R&D tax credits claimed in 2011-12 were done so by larger firms (£780 million), as opposed to SMEs (£420 million).
Other tax incentives such as the Seed Enterprise Investment Scheme (SEIS), which stimulates investment in start-up and risky businesses by allowing investors to off-set losses, and Patent Box, which sees companies pay less corporation tax by reducing the rate to 10 per cent on profits generated from patents or similarly protected innovations, were even less well known.
SEIS was only known by 8 per cent of respondents, while Patent Box had even fewer with 4 per cent.
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George Bull, tax partner at Baker Tilly, says the results show that UK SMEs are missing out on generous 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,’ Bull believes.
‘Anecdotal evidence suggest 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.’
The tax incentive which was found to be most well known was Capital Allowances, amounts of money which a UK business can deduct from overall corporate or income tax on its profits.
Baker Tilly says that awareness is the biggest issue, as most businesses tend to use schemes once they are discovered.