Research and development tax credit take-up on the rise

The latest statistics from HM Revenue and Customs (HMRC) confirms there was a 22% year-on-year increase in the number of claims submitted for research and development (R&D) tax credits in 2017-18.

Just 39,960 businesses filed R&D tax credit claims in 2016-17, but this figure rose to 48,635 in the following year.

As a result, £31.3 billion was claimed as qualifying R&D in the 2017-18 tax year, which is another year-on-year increase of 26%.

Although only a small number of eligible small businesses are said to be claiming R&D tax relief for their innovation and research, the UK government has now offered £26.9 billion in claimed tax relief since the initiative’s launch in 2000.

However, the new HMRC figures do reinforce the view that R&D claims remain concentrated in certain UK regions and business sectors.

Almost half (46%) of all R&D claims made in 2017-18 were derived from businesses with registered offices in London, the South East or East Anglia.

Furthermore, more than two-thirds (68%) of all R&D claims made in 2017-18 were made by firms in the manufacturing, professional, scientific and technical, and information and communication sectors.

More than two-fifths (40%) of R&D claims were also submitted by businesses with less than ten years of trading history. Despite ongoing campaigns from HMRC to raise awareness, it seems many firms still believe R&D tax credits to be most relevant to younger companies.

The truth of the matter is that any small business which engages in a project seeking to make advances in their field is undertaking R&D. Whether it’s refinements to existing processes or products, however big or small the projects may be, they are sufficient for a successful claim.

At the time of writing, R&D tax relief for all eligible SMEs is 230%. For each £1 of qualifying expenditure, you’ll receive £1.30 of additional tax relief. Even loss-making firms can claim for repayable tax credits of approximately 14.5%.

Still unsure whether your small business is eligible for R&D tax relief? We can work with you to check your eligibility and guide you through the process of claiming tax credits for all qualifying R&D expenditure.

To arrange a free initial consultation on SME R&D Relief and any subsequent claims, call our friendly and experienced team today on 020 7590 3162. Alternatively, you can drop us a line using our online enquiry form.

Date published 17 Oct 2019 | Last updated 25 Sep 2020