Financial Secretary visits a small business Vivobarefoot to launch new research and development plan
In a major boost for pioneering small businesses, the Financial Secretary to the Treasury, David Gauke, today (Wednesday 28 October) launched a new plan outlining how government will make it easier for small businesses investing in research and development to claim tax relief.
The two-year plan, which is a response to an HMRC consultation, 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 to 2014 show more than 15,000 SMEs 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.
Financial Secretary to the Treasury David Gauke said:
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’s 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, said:
Innovation is at the heart of what we do. We are proving that the modern shoe industry, with its padding and support are 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. They have claimed R&D tax relief for five years and have since become a market innovation leader, working at the cutting edge of running shoe technology.
The plan, ‘Making R&D Easier: HMRC’s plan for small business R&D tax relief’, was published today and 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. 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.
- 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.
SME R&D relief works by way of super deduction, allowing companies to reduce profits liable to corporation tax by 230 per cent of their qualifying R&D expenditure.
In 2013/14, businesses received £1.75 billion in R&D tax relief, an increase of almost £750 million since 2009/10.