Each year, the government reveals the total number of R&D Tax relief and credit claims and awards in the previous tax year, and whilst it always makes for interesting reading with statistics advising the total number of SMEs that have benefitted from this financial support for their innovation, it also highlights the great number of companies that are potentially missing out.
It’s expected that the government’s R&D Tax statistics for 2016/2017 will be released in the coming weeks, and here we share our predictions for what they might show.
The government’s last ‘Research and Development Tax Credits Statistics’ report was published in September 2017, and revealed that in 2015-16, the total number of claims for R&D tax credits had risen by 19% on the numbers for 2014/15, to 26,255.
Whilst understanding amongst SMEs over their eligibility for R&D tax relief remains fairly low, based on the sustained increase in the volume of claims we have made on behalf of our clients, we would expect the number of R&D tax credits in the last financial year will have risen once again – potentially by a significantly higher percentage than the previous tax year, and perhaps even by as much as 25%.
In turn, the total amount of R&D support claimed and awarded will have risen too. Last year’s report stated that almost £2.9bn of R&D support was claimed in 2015-16, representing a 20% increase on the previous tax year. And we certainly expect this trend to have continued, and we would predict a similar percentage rise as a minimum, but potentially this could be as £3.7bn.
Luvo has continued to work primarily with SMEs operating in the manufacturing, professional, scientific and technical, and information and communication sectors, and this trend was matched in last year’s report, which identified these sectors made up 73% of the total claims in 2015-16.
Certainly, the vast majority of our work has been for SMEs and private businesses in these sectors, with Luvo acting both directly for companies in these sectors and via our intermediary and referrer network of accountants for their own clients. However, there are indications that the R&D ‘claims net’ is beginning to widen, and in the last year or so, we have worked for a growing number of firms in the construction, retail and financial sectors too; it will be interesting to see if this trend is echoed by the government’s national statistics.
Geographically, the volumes of R&D claims are concentrated in London, the South East and East of England. Whilst we work with companies across the UK, the vast majority of our work is with businesses in the Midlands. The government’s last report highlighted relatively low numbers of the region’s companies making R&D tax claims in 2015-26, with in the region of 1,500 in the West Midlands, and fewer than 1,000 in the East Midlands.
We hope the new report will show that regional firms are growing to understand their eligibility for R&D Tax, and that the numbers of claims by Midlands-based firms has risen, so that even more have benefitted from the financial support available for their innovation and commitment to and investment in R&D activities in the last tax year.
According to some statistics, nationally around 3.5million small businesses are actively trading in the UK, with 57% eligible for tax credits. However, only a very small percentage of UK small businesses have claimed the relief since the government launched the programme in 2001, meaning that in the region of 2 million or so SMEs are missing out on money available to them from HMRC.
It is clear that awareness and understanding of the R&D Tax support is disappointingly low, but Luvo is committed to working towards changing this, by educating SMEs on the R&D tax relief scheme and in turn encouraging more of them to take steps to legitimately take advantage of this financial support.
The government’s R&D tax stats reports for the last few years have encouragingly shown a steady increase in the number of claims and the total financial support provided by the government, and we hope (and expect) the figures due in the next few weeks will show this is continuing.
With the average claim worth in the region of £60,000, 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 enhancing existing ones. Our team of R&D tax specialists will manage the process, and identify and appropriately maximise qualifying costs. Please get in touch to discuss your potential claim: email: firstname.lastname@example.org or call us for a no obligation chat on 01902 244210.