Government launches research and development plan to boost small businesses

A new plan has been announced outlining how government will make it easier for small businesses investing in research and development to claim tax relief.

The two-year plan, announced by financial secretary to the Treasury David Gauke, is a response to an HMRC consultation that aims to increase take-up of research and development (R&D) tax relief through raising awareness of the relief amongst small businesses and making it easier for them to apply.

The tax relief, which encourages companies to invest in costly new product development, helps companies reduce the amount of corporation tax they pay on profits by offsetting them against any investment in research and development.

Latest statistics for 2013/14 show more than 15,000 small and medium-sized enterprises claimed the relief in 2013, an increase of around 19 per cent from the previous year, but the government wants to go further.

The financial secretary visited London-based footwear specialist Vivobarefoot to launch the plan and to see first hand how the government’s R&D tax relief has helped the small business invest in developing world class products.

Gauke says, ‘R&D is crucial for the long-term growth of the UK economy. Over 15,000 SMEs claimed the relief in 2013, an increase of around 19 per cent from the previous year, but we need to go further to support pioneering small businesses.

‘That is why we’ve published a document setting out our plans to increase awareness and make it easier for people to apply.’

Vivobarefoot CEO Galahad Clark adds, ‘Innovation is at the heart of what we do. We are proving that the modern shoe industry, with its padding and support, is doing more harm than good and the modern world has a movement crisis. It’s good to have the government support us against the biggest brands in the world on what we think is a very important social mission.’

Vivobarefoot designs shoes to prevent common sports injuries caused by standard sports trainers. The company has claimed R&D tax relief for five years and has since become a market innovation leader, working at the cutting edge of running shoe technology.

The plan sets out that, from November, small companies with a turnover under £2 million and fewer than 50 employees will be able to seek advance assurance on R&D tax relief. It is proposed that this will give them greater certainty and enable them to plan their finances effectively.

HMRC will explore ways to improve its communication around R&D tax relief, including looking at ways to use data and work with other government agencies to identify companies that have carried out R&D but have not claimed relief.

Also, interactive guidance will be developed with stakeholder involvement.

HMRC evaluation shows that each £1 of tax foregone by R&D tax relief stimulates between £1.53 and £2.35 of additional R&D investment.

Further reading on R&D

Ben Lobel

Ben Lobel

Ben Lobel was the editor of from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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R&D Tax Credits