22% jump in R&D tax claims, but many businesses still missing out

Why are we seeing an increase in R&D tax claims?

“Whilst there has also been a small increase in larger businesses claiming, it seems a majority of those new to making R&D claims are small businesses”, says Paul Woodward.

In April 2012, the government made some changes including removing a minimum limit of £10,000 R&D expenditure, to the R&D tax credit scheme. This meant that many more companies became eligible.

R&D tax claims also became more attractive to small businesses, with an increase in the rate of payable tax credits in 2015-16, which meant a higher rate of tax credits can now be claimed.

Who has been claiming R&D tax relief?

HMRC’s data shows that R&D claims are highly concentrated amongst companies with a registered office in London, the South East or the East of England. 46% of all claims come from this region, which accounts for 62% of the total amount claimed. However, because this is where the registered office is located, it doesn’t necessarily mean that this is where the R&D took place.

In terms of industry sectors, it is still dominated by the sectors where you would traditionally expect to see R&D. Manufacturing, professional, scientific and technical, and information and communication sectors all continued to have the greatest volume of claims. These made up a total of 73% of claims and 75% of the total amount claimed for in 2015-16 (the latest available data).

Paul Woodward adds, “It is important to note that in these latest figures released by HMRC, R&D tax claims spanned almost every single industry. Therefore, businesses should not make the wrong assumption that R&D claims are only open to those who work in white jackets. In fact, quite the contrary and many businesses are, sometimes unwittingly, performing tasks and projects that might qualify.”

“I would urge companies who are in any doubt to contact our tax team. We will be happy to discuss the activities that you are carrying out to assess whether there could be a potential for a claim”, said Paul Woodward.

Patent Box still going strong

Meanwhile, separate HMRC statistics show a doubling in the uptake of Patent Box relief with companies in London claiming the most (£4.3m tax relief or 0.7% of the total).

Patent Box allows companies to apply a reduced 10% corporation tax rate to profits attributed to patents and certain other similar types of intellectual property (supplementary protection certificates, regulatory data protection and plant variety rights).