Sector Focus: Finance


East Midlands firms make the most of R&D tax credits


New statistics from HMRC have revealed that there was a 28% year-on-year rise in the number of claims for research and development (R&D) tax credits submitted by East Midlands companies in 2017-18, with the level of support also rising by 28%. The latest data shows that East Midlands companies submitted 3,120 claims for research and development tax credits in 2017-18, up from 2,430 in 2016-17 reported in September last year. UK-wide, the total amount of


R&D support claimed rose to £4.3bn, an increase of £1bn from the previous year. First introduced in 2000, R&D


tax credits are designed as a tax relief to encourage greater R&D spending and innovation. Since launch, over 300,000 claims have been made, with £26.9bn claimed in tax relief. Over time, the rate of relief has


become more generous and is now worth up to 230% for SMEs. This means that for each £100 of qualifying costs, the corporation tax paid by SMEs on income could


be reduced by up to an additional £24.70 (applying 19% UK corporation tax rate for FY18). The statistics show an interesting


trend relating to age of claimant companies. Just over 40% of claims are made by companies less than ten years old. This suggests that despite continued efforts by both HMRC and the adviser community, businesses still perceive R&D tax credits to be predominantly for young companies. However, more established companies continue to innovate year on year to remain globally competitive, and may be failing to recognise their entitlement to claim. Commenting on the figures,


Sheetal Sanghvi, RSM’s Regional Head of R&D tax, said: “It’s very encouraging to see that East Midlands companies saw the highest rise in R&D claims across all UK regions. “This rise in claims has proved challenging for HMRC and companies applying for R&D tax reliefs have experienced significant delays in the processing of claims, sometimes up to nine months.


“To the relief of claimants and


their advisers, new resource has cleared the backlog and HMRC is now better equipped to handle higher levels of claims. In October the processing of claims moved to a larger team in Cardiff, which should be better able to cope with the fluctuations in demand. “While much is uncertain as


we move towards the next deadline in the Brexit saga, enhancing the R&D scheme would be an obvious lever available to the Government to try and boost the UK economy.”


‘Just over


40% of claims are made by


companies less than ten years old’


Sheetal Sanghvi


90 CHAMBERconnect Autumn 2019


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