Travel firms could be eligible for thousands of pounds of tax relief on their technology investments but very few are aware of this, the Elman Wall Travel Directors’ Summit was told this week.
Alison Lynch, managing director of Howarth Lynch, a specialist in research and development tax relief, said the UK government is looking to encourage innovation and technological development in businesses.
She warned not all technology projects would qualify for relief but the amount of money at stake means it is worth firms exploring the possibilities.
Small to medium sized firms with under 500 employees can qualify for relief of up to 225% and this can be backed dated for up to two years.
Since the R&D tax relief scheme was launched 12 years ago £7 billion in claims have been successfully made and recent changes to encourage more use of the relief has seen claims from small business jump 10% this year and last.
Lynch said the complex legislation governing who is eligible boils down three fundamental criteria.
The first is that the project is aiming to achieve a material advance, the second that it is overcoming uncertainties and thirdly that the solution is not easily deducible.
Lynch said this could mean a travel company implementing an off-the-shelf IT product but programming it to its own specific requirements.
“An advance does not have to be blue sky innovative or groundbreaking. If you look at the travel industry this is usually internal software development,” Lynch said.
“You have a system that works for you and you want to make it faster or you want to develop a mobile application. In software terms a lot is about scalability now, technology making things work faster, real time or security issues.
“The UK government wants to encourage productivity and it wants to keep it here. Every OECD country has an R&D tax relief system.
“The revenue [HMRC] wants to encourage people to make claims because it’s going to help them stay in business and help them become more advanced in the UK. Claims have gone up exponentially.”
Lynch added that as a general rule an eligible project has to last at least three to six months and that it represents a degree of technical difficulty.
“In the travel industry you are having to keep up with technology and you are having to develop these solutions. It’s not just a case of someone in the US having done this once and that’s it for everyone. It is not readily deducible how they have done that,” she said.
Russell Esien, tax director at Elman Wall, said: “The Inland Revenue has confirmed that this tax relief is available for the travel industry. The reason for this acknowledgement is changes in the industry leading to a far more sophisticated internet presence.
“There are many travel businesses still unaware of this relief potentially missing out on hundreds of thousands of pounds of tax rebate.”