Lancaster and Morecambe businesses missing out on crucial tax relief

TECHNOLOGY and science businesses in North Lancashire are spending thousands of pounds on tax they don’t have to, according to a local business advisor.

Rachel Marsdin, an associate director at the Lancaster office of accountants, Moore and Smalley, told over 50 technology businesses gathered at an event held in association with Business Link Northwest, that small and medium sized companies are not making the most of Research & development (R&D) tax relief – known as R&D tax credits.

R&D tax relief is a Government incentive aimed to promote investment in innovation in the science and technology industries. The relief can help businesses reduce taxable profits and can create or increase taxable losses, meaning businesses pay less corporation tax or can even lead to cash back from the Government

However, Mrs Marsdin, who advises a number of technology companies across North Lancashire, says businesses are not taking advantage of the initiative, which was enhanced by the Government in the 2008 Budget.

She said: “North Lancashire and the surrounding area are a hot bed of innovation, science and technology with more companies coming into the market. You only have to look at the progress of Lancaster University’s InfoLab21 to gauge how progressive these sectors are in this region.

“Broadly speaking, if the company does not turnover more than £25.9 million, have more than 250 employees and is investing to extend or improve its overall knowledge or capability in a field of science or technology, they stand a good chance of obtaining the relief. We have helped numerous companies make good tax savings through the scheme.”

According to the Government, the aim of the tax credits is to encourage greater R&D spending in order to promote investment in innovation.

By early 2006 about 22,000 claims had been made, just over 19,000 of which were made under the SME scheme and just under 3,000 of which were made under the large scheme, amounting to almost £1.8 billion of support claimed through both schemes.

Speaking on the improvements revealed in the 2008 Budget, Rachel added: “The enhanced relief for qualifying expenditure for small and medium sized companies increased from 150 per cent to 175 per cent.

“This means if a business spent £100,000 on qualifying expenditure when working out its taxable profit, it can deduct £175,000 from its profits – of which companies are taxed on - if this was incurred post April 1 2008 and £150,000 for expenditure incurred on or before March 31 2008. For large companies the enhanced relief is increased from 125 per cent to 130 per cent.”