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Firms encouraged to apply for Research and Development tax relief following Budget

Leading chartered accountants Newby Castleman is urging small and medium sized enterprises (SMEs) to apply for tax relief for their research and development (R&D) costs.

This comes following calls from respected think tank the Institute for Public Policy Research (IPPR) for the government to make changes to the R&D tax credits system.

The Chancellor Phillip Hammond announced an extension to the rate of R&D tax credits to 12% in last week’s Budget, however this rate is applicable only to larger companies (unless R&D is subcontracted to an SME).

The IPPR says in its recent report that most of the relief for R&D is going to larger companies, instead of to SMEs which could benefit more from this financial assistance.

Jacquelyn Kimber, Tax Partner at Newby Castleman, says many firms are missing out on tax relief, which she believes is “extraordinarily generous” and should rightfully be theirs.

“The whole point of this tax relief is to boost businesses’ productivity,” explains Jacquelyn, “but many SMEs may not be aware that they are entitled to it, and might not even realise what counts as research and development.

“For example, R&D doesn’t necessarily have to be involvement in new processes or inventions – it can mean adapting and modifying existing software, machinery, or procedures to meet a company’s particular requirements. Staff costs and consumables involved in this can be claimed against, and it’s up to firms to identify these with effective time recording and expense systems.”

The IPPR states that in the 2014/15 financial year 800 firms made use of the system, but that 95% of the tax relief claimed went to 305 of the UK’s largest companies.

SMEs which may be eligible to apply for tax relief for their R&D costs should contact Newby Castleman for more information and advice in filling out their tax return.

Newby Castleman is one of the Midlands’ leading independent accountancy firms, with offices in Leicester and Loughborough. It offers a range of specialist financial services, business and tax advice for individuals and businesses. For further information, telephone the Leicester branch on 0116 254 9262, the Loughborough branch on 01509 263500 or visit the website at

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