A survey by Baker Tilly has found low awareness and usage of some tax incentives by small and medium-sized businesses which could be hampering their prospects for growth.
Only 15 per cent of the 750 SMEs surveyed knew about R&D tax credits, despite the Government launching the scheme nearly 14 years ago.
Other tax incentive schemes also appeared to have a low profile, with only eight per cent knowing about the Seed Enterprise Investment Scheme (SEIS) and four per cent aware of the Patent Box.
R&D tax credits were first introduced in 2000-2001 to encourage greater R&D investment. Since then, the available tax breaks have become more generous and HMRC has expanded the way it interprets and applies the rules in order to provide greater stimulus for innovation in the economy.
The latest figures from HMRC show that most of the R&D tax relief claimed in 2011-12 was by large companies (£780m) rather than SMEs (£420m).
In addition, SMEs in Yorkshire and the Humber only filed 695 claims for R&D tax relief worth £19m in the year 2011-12, just seven per cent of the UK total of 9,875 claims.
According to the survey, only one tax incentive – Capital Allowances – was recognised by more than half of respondents (55 per cent) surveyed.
The survey did find however, that once businesses knew about an incentive, they tended to use it, suggesting that knowledge was the main issue, rather than perceived scheme effectiveness.
“Our survey supports what we already suspected that many UK SMEs are missing out on generous tax incentives, and this may be particularly true in Yorkshire where SMEs account for only seven per cent of UK claims for R&D tax relief.
“The Government certainly needs to do more to raise awareness but firms in the region should also be asking more questions to find out what’s available.”