Even when senior managers and owners at smaller UK engineering firms have heard of R&D tax relief, more than a third (36 per cent) believe it is restricted to specialist hi-tech science or drug companies.
But with 55 per cent of survey respondents saying they have spent time and money ‘developing a new product or process over the past three years’ — the basic requirement for an R&D tax claim — the likelihood is that more than half of British engineering firms could be due a sizeable tax windfall.
Furthermore, 35 per cent of the engineering firms polled mistakenly believed that any eligible R&D activity must be successful for a claim to be made even though the outcome of the R&D is irrelevant. What matters is the time and money spent developing the new technology, processes or techniques.
According to tax relief experts Catax, the time and money spent developing the new technology, processes or techniques is key to R&D tax relief.
The ongoing lack of awareness around R&D and the eligibility criteria that apply to it is costing the UK’s engineering firms millions in tax relief each year. To date, the average R&D tax benefit for engineering clients of Catax is just over £39,000.
Mark Tighe, CEO, Catax, said: “British engineering firms are recognised around the world for the sheer depth of their innovation.
“But in far too many cases the tax relief available to the companies driving this innovation is being overlooked, often at great cost.
“This is especially the case with smaller engineering firms, which may not have access to the tax resource and expertise of their blue chip counterparts.
“It’s crucial engineering firms seek advice about the tax relief they are due for the valuable research and development they are carrying out, which will often amount to tens of thousands of pounds.”