HMRC has published their latest figures in the 2016-2017 Research and Development Tax Credits Statistics Report. R&D tax credits are available to businesses to either reduce their corporate tax bill or by making a repayment to the company. These reports shed light on which businesses, industries and regions are capitalising on the scheme as well as the state of scheme awareness and claims.
The R&D tax credits scheme aims to encourage innovation and investment in research and development activities. The programme was launched in 2000 specifically for SMEs. However, as the scheme has progressed, it has expanded eligibility, allowing large companies to claim as well as ridding a £10,000 minimum spend threshold for R&D activities. The most recently published report shows that since the inception of the scheme up until 2016-17, £21.4 billion in tax relief has been claimed.
Increasing Tax Relief Uptake
The most recent report has shown that there has been a notable increase in businesses taking advantage of the tax credits. So far in 2016-17 over £3.5 billion of tax relief support for R&D activities has been claimed from 39,960 claims. Of these claims, 85% (34,060 claims) have been part of the SME R&D scheme.
While this uptake for 2016-17 is impressive, growth cannot yet be calculated from these results as not all claims have been received. HMRC still expects the figure to increase as they accept more tax returns for the period.
The recent HMRC report does, however, show the growth between 2014-15 and 2015-16 as complete tax years. In fact, 2015-16 saw an increase of 22% more claims from the previous year. Similarly, there was a 25% in claim amounts. However, only a 16% increase in R&D expenditure. This suggests that businesses are starting to wise up to the R&D tax relief scheme with greater knowledge and assistance from consultants on how to maximise their benefits. Tips on this follow later in this article.
Which Businesses Are Still Missing Out?
One of the standout figures from the HMRC report was the regional disparities. London and the South East accounts for 60% of the total claim amounts and 45% of all claims. This is thought to be primarily due to the fact that they have easier access to specialist advice. However, it may also be due to the fact that statistics show the registered office location. This may not necessarily be the place where R&D activities take place. Regardless, this does show that businesses outside London and the South East need more support to take advantage of potential claims.
With 75% of SME claims under £50,000, the average claim being £53,000, it shows that more support is required to support innovation in the UK.
In Yorkshire and Humber, so far for 2016-17, 2,275 claims were made in the SME scheme amounting to £85 million. Alongside, Wales, Northern Ireland and the North East, Yorkshire and the Humber have the lowest average claim amounts. In fact, Yorkshire and Humberside businesses have the lowest average claim value of any region in the SME scheme at just £37,360 compared to the national regional average of £53,900.
Is Your Business Missing Out On R&D Tax Benefits?
In 2017, statistics show that there were over 5.7 million SMEs in the UK, comprising of 99% of all business. With only 43,040 claims in 2015-2016, and 39,960 so far in 2016-17 this suggests that many organisations who conduct R&D activities are still missing out on the tax benefits entirely. Whether you are not sure if your business is performing eligible R&D activities, or you want to maximise your claims, get in touch with TEQ Group today to organise your eligibility assessment and potentially drastically reduce your corporate tax bill.