New Government statistics have revealed that less than five percent of SMEs that are potentially eligible to claim R&D Tax Credits have made a claim.
Whilst the number of claims has steadily risen each year in the 17 years since R&D Tax Credits were launched in the UK, the government’s 2016-2017 data reveals that thousands of businesses continue to miss out on the SME scheme’s average claim value of almost £54,000.
Ian Batkin (pictured, right) a Partner at Luvo Financial, which specialises in advising businesses about R&D Tax Credits, explains that while the government’s figures for 2016-2017 are not yet complete, it is clear the vast majority of SMEs are still missing out on the opportunity, despite the number of claims continuing to steadily rise:
“The government has published its latest statistics on the figures so for available on the total number of R&D Tax claims in the 2016/17 tax year, which show that 39,960 R&D Tax Credit claims have been made,” he explains. “Of these just over 34,000 are by companies claiming under the SME scheme, but only 5,820 are from SMEs making their first ever claim.
“There is a big opportunity for more claims by more companies, especially SMEs, who are simply missing out on this legitimate financial reward for their investment in developing innovative products or services, either because they believe they aren’t eligible at all, or because they are unsure of how to make a claim.”
London and South East still have the highest numbers businesses making claims, and represent more than a third (35.1%) of the total and almost half (45.2%) of the UK’s highest value of claims by SMEs.
The figures for the Midlands are significantly different, says Ian: “By contrast, claims by companies in the Midlands represent just 14.8% of the total SME claims, equating to only 11.6% of the total value claimed by SME’s countrywide.
“There is still room for more local businesses that are genuinely eligible for R&D tax credits to benefit from the scheme, and with the average claim in the region of £54,000, according to this recent government data, this is a significant potential financial boost for them.
“It is certainly encouraging that the number of companies now claiming for the first time has grown in the past couple of years, but there is such a big opportunity for so many others to also benefit.”
A total of 240,000 R&D Tax Credit claims have now been made and £21.4bn relief has been claimed by companies since the scheme launched in 2000.
First time claimants increased
Luvo Partner Vicki White (pictured, left) adds: “It’s interesting and encouraging that the number of first time claimants has increased in the past couple of years, but of the total number of eligible SMEs in the Midlands and across the UK, there remains just a small percentage that have actually made a claim.
“With most claims valued at between £50,000 and £60,000 – so an average of almost £54,000 – we want local businesses to realise they too could benefit from this government scheme. Innovative projects large and small, for new products, processes and services, can qualify.”
Vicki explains that the data also reveals that claims by companies in the manufacturing and IT / Comms sectors continue to represent more than half (51.6%) of the total number of claims by SMEs: “As in previous years, these are the most active sectors for making claims, but there is similar opportunity for claims by companies in many more sectors, and a big opportunity for more SMEs based in the Midlands and outside of the South East.”
R&D Tax Credits are a valuable government tax incentive for limited companies who invest time and money into developing new products, processes and services, or significantly enhancing existing ones. Contact Luvo for more information.