A BAKER Tilly survey reveals there is low awareness and usage of tax incentives among small and medium-sized businesses which could be hampering their prospects for growth.

The survey showed that only 15 per cent of the 750 SMEs surveyed knew about research and development tax credits, despite the Government launching the scheme nearly 14 years ago.

Other tax incentive schemes also appeared to have a low profile, with only eight per cent knowing about the Seed Enterprise Investment Scheme (SEIS) and four per cent aware of the Patent Box.

Research and Development tax credits were first introduced in 2000-2001 to encourage greater R&D investment. Since then, the available tax breaks have become more generous and HMRC has expanded the way it interprets and applies the rules in order to provide greater stimulus for innovation in the economy.

The latest figures from HMRC show that most of the R&D tax relief claimed in 2011-12 was by large companies (£780m) rather than SMEs (£420m).

According to the survey, only one tax incentive – Capital Allowances – was recognised by more than half of respondents surveyed.

But once businesses knew about an incentive, they tended to use it, suggesting that knowledge was the main issue, rather than perceived scheme effectiveness. Tim Smith, who is a corporate tax partner at Baker Tilly’s office on Basing View said: “SMEs need to take responsibility for finding out about R&D and other tax breaks on offer, in order to take advantage of all opportunities to grow.

“Anecdotal evidence suggests there is a perception that R&D refers to lab-based work only, whereas a whole range of innovative measures in SMEs can be classified as R&D.

“We know from experience that when we have helped SMEs make claims, they have substantially reduced their tax liabilities.”