Solicitors missing out on R&D tax relief, specialist claims
Solicitors' firms are failing to claim millions of pounds a year in research and development tax relief for which they could be eligible, according to specialist firm Catax.
It estimates that as many as 87% of practices could qualify for R&D tax relief in respect of new products or business processes which they have developed in the past two years, but fewer than half have ever claimed it, despite 80% of firms knowing of the relief.
A study by Catax found that many practices fail to claim either because they do not think they qualify, or they incorrectly believe that it could cost them money.
Managers also underestimate the value of the average SME claim for R&D tax relief, believing the average value to be just £16,833 when the true figure is £46,000 for firms in all sectors nationwide. Law firms report spending £178,002 on R&D on average.
Catax point out that R&D does not have to be successful to qualify for relief, and claims can be made up to two years after the end of the tax year in which the R&D was undertaken.
R&D tax credits can help to reduce a limited company’s corporation tax bill or be claimed as a cash sum reimbursement from HMRC. R&D tax relief only applies to those businesses that are liable for corporation tax, including businesses making a loss.
Catax CEO Mark Tighe commented: "The number of law firms who report developing a new service is relatively high.
"The national average is around 78.5% of business so the legal sector is punching well above the mean with 87%.
"It just goes to show R&D is not all about lab coats and multinational companies."
He added: "This means nearly all law firms should be looking at what they can claim. Cost benefit doesn’t come into it because most good R&D tax relief firms will work on a commission basis."