HMRC report shows rise in R&D tax relief claims but many SMEs are still missing out
Phil Hartley, tax manager at North West accountancy firm Mitchell Charlesworth comments on the latest research and development (R&D) tax relief statistics from HMRC and the latest trends in R&D claims in the North West.
Revised statistics from HMRC for 2015/16 and 2016/17 tax years continue to show that the number of R&D tax credit claims being made are on the rise – 43,515 for 2015/16 and 52,335 for 2016/17 claims compared to 35,410 in the 2014/15 tax year.
The 2017/18 tax year continues to show an upward trend in the number of claims being made, with 48,635 claims having already been made up to 31 March 2019 with another year of submissions still to come.
In turn this has led to increased tax relief being claimed – in 2015/16 £3,860bn was claimed, an increase of 29% from 2014/15. In 2016/17 £4,390bn was claimed, an increase of 14%. £4,330bn has already been claimed for 2017/18 and HMRC are estimating a final claimed amount of close to £5bn.
These latest statistics continue to show that the Government and HMRC are supporting R&D tax relief claims and that awareness of the relief is continuing to grow, however, only 1% of active companies are claiming the relief meaning many SMEs are missing out on this valuable tax credit.
The biggest concentration of claims remains in manufacturing, IT and professional, scientific and technical sectors as with previous years. However, the construction industry saw a big rise in claims along with the health and social work industry and the food industry. This indicates that more and more are realising, rightly, that they can qualify for this lucrative relief even though they are not from a ‘traditional’ R&D industry.
The North West is the third largest claimant of R&D in the country in terms of number of claims, accounting for over 10% of the claims, with only London and the South East accounting for more claims. However, the amount of R&D relief claimed by North West companies is substantially lower than the national average. The average SME claim in the North West is £38,027 compared to the national average of £49,419. The average research and development expenditure credit (RDEC) claim (the scheme used by larger companies) is £172,414 compared to the national average of £300,139. This demonstrates that the region is becoming more aware in making R&D claims but the North West continues to be receiving less than the national average.
Businesses need to ensure that a claim is valid and that all available costs are considered and captured, which is where a professional advisor will be able to provide advice and support.