Are More Businesses Claiming R&D Tax Credits?
With over 20 years since the introduction of the Research and Development (R&D) relief, the landscape of scientific and technological advancement in the United Kingdom has changed significantly.
The tax credit, which was introduced by the government in 2000, aims to encourage innovation by businesses up and down the country, helping to pave the way for future developments and game changing discoveries.
In a statistics report recently released by the Government, it is documented that research and development relief in the run up to before the pandemic was on the rise, despite growing uncertainty towards the end of the financial year.
Key Takeaways From the Government’s Report
Regarding the number of claims, the government report found that:
- The estimated total number of R&D tax credit claims for the financial year ending March 2020 is 85,900. This is a 16% increase from the previous year.
- This increase was mainly driven by a 16% rise in claims from Small or Medium-sized Enterprises (SMEs), reaching 76,225.
- The remaining 9,675 claims were from the Research and Development Expenditure Credit (RDEC) scheme, where claims increased by 12%.
The number of SME claims, can be broken down to:
- 38,050 claims made solely for a deduction from CT liability.
- 38,175 claims that included a payable tax credit.
For claims made under the RDEC scheme, 4,370 were from large companies and 5,305 claims were from SMEs able to claim under the scheme as subcontractors.
Regarding the amount of relief claimed:
- The estimated amount of R&D tax credits claimed over the same time period was £7.4billion.
- This figure is made up of £4.4 billion SME claims and £3.1 billion RDEC scheme claims.
Within the RDEC scheme, £2.7 billion of the overall figure is comprised from larger companies and £375 million from SMEs.
The total support claimed through the SME scheme has increased by 25% compared with the previous year, and the total support claimed through the RDEC scheme has increased by 11%.
In terms of R&D expenditure:
- The amount of qualifying R&D expenditure used to claim R&D tax relief is estimated to be £47.5 billion. This marks an increase of 15% from the previous year.
- 67% of this expenditure was by companies claiming under the RDEC scheme.
Regarding regional and industry sector analysis:
- There is a concentration of claims by companies with registered offices in London. This makes up 20% of total claims and 31% of total amount claimed.
- There is also a concentration in the South East, making up 15% of total claims and 18% of total amount claimed.
- The most prominent sectors for R&D claims during this time period continues to be businesses operating in the Information and Communication, Manufacturing, and Professional, Scientific and Technical areas. These sectors made up 69% of the total support given over the financial year in question.
Is My Business Eligible for R&D Tax Credits?
It is estimated that even with the increase in research and development claims over recent years, only around 20% of eligible businesses are claiming the tax relief. This is largely because they may not believe they qualify for it, so it’s important for you to check whether the relief is applicable to you.
To claim R&D tax credits, you need to be a Limited Company within the United Kingdom that pays Corporation Tax, and have carried out and spent money on research and development activities that qualify for the scheme.
How Innovation 4 Business can help
If your company is spending money on research and development activities that attempt to resolve “scientific or technological uncertainties”, you may be eligible. This activity ranges from creating new products, processes and services to even simply changing or modifying existing ones.
If you’d like to find out more about claiming research and development tax relief, take a look at our brochure or contact us to arrange an initial assessment by calling 0121 309 0222 or email our experienced team at firstname.lastname@example.org.