R&D Tax Credits claims on the increase

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HM Revenue & Customs has released its latest figures in relation to the UK R&D Tax Credits tax incentive.

Headlines are as follows:

  • 85,000 claims filed since the SME and Large schemes were introduced in 2000-2001.
  • £8bn+ of tax relief has been claimed.
  • 24,000 different companies have made claims under the SME scheme since 2000-2001.
  • 6,300 under the Large company scheme (launched in 2002-03).
  • 16.5% increase in claims for R&D tax credits in 2011-12 to 12,190 representing £1.2bn of tax relief – split as £780m for Large companies and £420m under the SME scheme
  • 6,710 SMEs claimed R&D relief as a deduction against corporation tax liabilities compared to 790 claims for a payable tax credit (payable to loss-making companies).

Although these headlines make for pretty encouraging reading, there is still a long way to go to ensure that UK companies are claiming their fair share of this generous tax relief

Reading between the lines, its worth noting the following:

  • Less than 10,000 SMEs made a claim in 2011-12 – v approx 4m UK SMEs. Even taking a prudent guess that less than 1% of SMEs satisfy the criteria for the enhanced R&D tax relief, this should still equate to approx 40,000 company claims. So where are the missing 30,000 company claims? Is your company missing out?
  • Average SME claims were £42,000 with London topping the bill with an average claim of £60,000 and Yorkshire falling furthest behind with an average £27,000 claim for R&D tax relief. These figures clearly demonstrate what a favourable and generous tax relief the R&D tax incentive is for UK companies
  • Business services’ makes up the majority of the claims by industry sector which suggests a significant proportion of software related R&D claims – this is interesting when compared to the general apprehension of companies to make an R&D claim for software related services and products. £175m tax relief was secured by the Business Services sector which is almost double that secured by the No.2 spot taken by the ‘Manufacturing’ sector. So if you are involved in software development your competitors are likely securing their claims – are you?

Overall, this latest study is encouraging in that it shows the continued upward trend in R&D claims but we must not be complacent

We are driven to ensure that all UK companies that are undertaking qualifying activities are made aware and assisted either by filing an R&D tax credit claim on your behalf or working with your accountants to optimise existing claims.

This favourable tax incentive can help release more cash into your business to invest in further jobs, equipment and the development of new products and services. Don’t miss out!