So, a recent report from RSM Tenon (as reported in Accountancy Age) suggests that
“A third of small- and medium-sized enterprises could be failing to take advantage of tax breaks.”
That statistic almost certainly highlights a bigger problem, however. Although I have not seen the full report from RSM Tenon, I suspect that the 33% figure is those SMEs who don’t take advantage of any tax reliefs (or maybe any of a number of specified reliefs). The results for SMEs failing to take advantage of specific reliefs is likely to be much worse. For example, their press release suggests that only 10% of the SMEs in the study were making use of R&D relief.
The question, however, is why?
Focusing on R&D relief, this incentive has been around for 12 years and has become more valuable over those years as the rate of relief has been raised. So why do so many SMEs fail to claim it?
Is it poor ‘marketing’ on the part of the Government, failing to make these companies aware of the incentive? To be fair, HMRC has made significant efforts to promote R&D relief.
So is it down to the directors of these companies not bothering to claim? Perhaps they are just too busy to worry about tax relief. Well, to be fair (again) directors of SMEs have a lot of different things to worry about and tax may well be low on their list. They are less likely to have a finance function, let alone a tax department, to help them. Which is why they will, almost certainly, be relying on their advisers to, well, advise them on available reliefs.
So why are so many SMEs missing out on valuable tax reliefs like R&D credits? Unfortunately, I suspect that their advisers must take at least some of the blame for this. Some of these reliefs are quite specialised and, as I discuss in my previous blog post some advisers do seem reluctant to involve specialists.