Apex Cables in Durham is better off to the tune of £20,000, thanks to its accountants spotting a tax break.
But other ground-breaking businesses in the region could be missing out on thousands of pounds in tax savings.
Apex Cables had laid out time and money in developing new products and services and its accountants Clive Owen pointed out that these expenses qualified for a further claims against the corporation tax bill.
Mike Lewis, director at Apex Cables says: “We are extremely pleased with the work carried out by the tax team. We were undertaking a sizeable research project and we were at an exciting point in the development of our business. The support we received with regards to the tax involved with research and development was first class and we saved over £20,000 in tax as a result.”
There are generous tax reliefs available for companies which spend money on innovation and research and development, but according to government figures some 80% of the relief businesses in the North East are entitled to are going unclaimed.
The costs incurred by a company in research and development, in developing a process or product if genuinely innovative, can qualify for a 125% uplift against its tax bill. That means those costs can not only be set against tax in the normal way, but be more than doubled as a legitimate expense.
Tax partner with Clive Owen Nicola Bellerby explains: “If you had spent an extra £10,000 on wages and other things, you would normally take that off your profit to pay a bit less tax but, instead of the £10,000, you can put in £22,500. You’ve spent £10,000, but you are able to knock off £22,500.
“Before R&D you might have made £100,000, and after R&D £90,000 but for tax purposes you can knock off another £12,500, so you are only taxed on £77,500 whereas if you hadn’t bothered with the claim you would have been taxed on £90,000.’’
The provisions are even more generous than at first sight in that the R&D could prove to be a waste of time leading nowhere but still qualify for the tax relief. Indeed, as Bellerby points out, fruitless R&D could actually be easier to claim for, it being easier to demonstrate that the relevant costs were not incurred in the normal course of business.
Senior partner Clive Owen says: “We have found many businesses are sitting on innovation without even realising it. We have helped businesses such as Apex Cables Limited, Visualsoft e-commerce and Peratech Limited claim gain significant amounts of tax on R&D.
“This can often make all the difference to a business and enable them to have the funding to continue carrying out research and innovative projects. These tax breaks give businesses the opportunity to develop ideas into reality and to support their own company growth and ultimately the economy of the North East region.’’
To try to get more companies to claim their tax relief and at the same time encourage innovation in the region Clive Owen and Teesside University have teamed up to identify innovation and development that is eligible for the tax break.
Professor Cliff Hardcastle, deputy vice-chancellor (Research & Business Engagement) at Teesside University, says: “This is an exciting new partnership which we believe will give business and enterprise throughout the region another route to ensure they are maximising all the support available to them.
“At Teesside University we are committed to investing in research and development. Research, teaching and business engagement are mutually reinforcing and the University has a key role to play in helping companies to innovate, increase performance and create wealth for the region.”