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Why SMEs are not accessing R&D tax credits

The Federation of Small Business (FSB) innovation survey stands out like a sore thumb. There are a huge number of SMEs not accessing or not even being aware of government support for their research and development (R&D).

Nearly 1,300 businesses were surveyed this spring by the FSB so the sample size is significant enough to paint an accurate picture across the board.

And it backs up what we already know. 80% of eligible SMEs have so far not claimed anything and that the UK is ranked only 11th of 28 EU countries for the scale of gross domestic product spent on R&D, at 1.67%.

Take-up of the government’s R&D tax credit program is only 30,000 SMEs annually from more than four million businesses. It could be so much better.

Here at GovGrant, since 2001 we have helped more than 5,000 SMEs recover government grants worth more than £160 million in the areas of innovation, Intellectual Property, and capital allowances.

We know that vital funding is available and also that there are plenty of companies and organisations busily innovating to keep ahead of the opposition. Our challenge is matching up the two, but first back to the survey results.

Most small businesses had not conducted R&D in a product, with 49% being unaware of any R&D tax relief that is relevant to their business.

A quarter of small businesses said their businesses did not qualify for R&D tax relief, but they would claim it if they were.

Furthermore, only 12% of small businesses qualifying for R&D tax relief had claimed it, while 4% of small businesses qualified for a R&D tax relief but had not put in a claim.

The findings concluded that the vast majority of businesses (90%) had not accessed government support to finance their innovation. Worryingly, that’s an even higher figure than the consensus view on this subject of 80%, and only 1% used Innovate UK grants.

Of those who did not access government support, almost half (46%) said they did not know of any support, 23% responded that government support was not relevant to them and 7% financed it through the private sector.

There were also many and varied reasons why government support was not sought: Support is too slow, bureaucratic and time-consuming (17%); business is too small (15%); it’s too difficult or complicated (12%) and it’s not aligned to business needs (6%).

Of course, many of those responses are exactly the reason why GovGrant exists – to check business eligibility and guide companies through the process, easing the way past hurdles and removing the stress from complex situations.

One further aspect of the survey was attitude towards intellectual property – the most common protection that small businesses applied in their business was confidentiality, including non-disclosure agreement (22%), copyright (15%), trademarks (11%), design registration (7%) and patents (5%).

Surprisingly, most small businesses do not protect their business improvements by patents.

In linked blogs, we look at the FSB survey findings in general: Most small businesses are innovating and how innovation is paying off for SMEs and what barrier they face: Innovation the key for better business.

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