Thousands of small and medium-sized businesses are missing out by failing to take advantage of research and development (R&D) tax credits, it has been claimed.
According to business advisers at Grant Thornton, small businesses are missing out on a total of £125m a year by failing to claim government funding which is earmarked for R&D.
Around £1.76bn of funding has been provided to companies for R&D through tax breaks or cash claims since the tax credits scheme was launched four years ago.
However, Grant Thornton warned that statistics suggest research and development is stagnating in the UK and is urging more small businesses to invest more heavily using the scheme.
Sarika Patel, head of technology at Grant Thornton, argued that many small businesses are unaware of the financial support they are entitled to.
Patel said: “R&D is no longer the sole domain of scientists in lab coats and is potentially a facet of every business.
“Anything that adds value to a product or process is potentially entitled to tax relief, but in our experience businesses are not actively looking out for this.”
She added that the government should extend its definition of what activities are eligible for the tax credit scheme as a means of boosting innovation, particularly given the prominence of the UK’s service sector.
“It is possible that non-technological sectors, such as the financial market, could produce serious benefits for the UK if they were encouraged, and saw the associated benefits, from undertaking R&D, but until the definitions of R&D are expanded, innovation in these sectors will remain untapped.”
© Crimson Business Ltd. 2007