From education to employment

Education firms wasting millions thanks to R&D tax relief blind spot

Firms in the education sector are throwing away millions of pounds a year because more than half could be eligible for tax relief on their bright ideas, specialist tax relief firm Catax revealed today (20 Mar).

In total, 58% of education businesses have developed new products or business processes in the past two years, research shows.

This means they are in line for valuable Research and Development (R&D) tax relief that the government provides to encourage innovation.

But despite 73% of firms knowing of R&D tax relief, only 1 in 5 (18%) report ever claiming it – either because they don’t think they qualify or they incorrectly believe that it could cost them money, the Catax study shows.

Incredibly, education bosses underestimate the value of the average SME R&D tax relief claim by £26,905, according to the Censuswide survey.

Executives believed the average value to be just £17,095 when the true figure is £44,000 for firms in all sectors nationwide. Education businesses report spending £108,782 on R&D on average.

R&D doesn’t even have to have been successful to qualify and claims can be backdated at least two years.

Catax CEO, Mark Tighe, commented: “The entire education sector could be millions of pounds better off if it took proper advantage of the tax relief available to innovators.

“It’s not all about lab coats and multi-national companies. R&D tax relief is available to SMEs and even sole-traders. You simply have to show that you have spent money developing a new product, service or business process.

“If you are an SME, or even a larger firm, applying for research and development tax relief could be the difference between growing your company and laying someone off. The R&D doesn’t even have to have been successful to qualify.

“Firms will only make a claim if the benefits outweigh the cost of applying so there really is nothing to lose.”

R&D tax credits can help to reduce a limited company’s corporation tax bill or be claimed as a cash sum reimbursement from the HMRC. R&D tax relief only applies to those businesses that are liable for corporation tax, including businesses making a loss.

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