For almost 20 years, successive UK governments have been encouraging companies to innovate by offering incentives through the tax system by offering R&D tax credits, but recent statistics suggest that our local region may be missing out on claiming them.
Government statistics on R&D Tax claims
Recent government statistics published in Oct 2019 for the year 2017-2018 show:
- claims by companies in the manufacturing sector make up almost 25% of total claims made.
- 29% of all relief paid out under the R&D scheme goes to companies in this industry.
- only 7% of all claims made, and 4% of the relief paid out, goes to companies in the Yorkshire and Humber region, with 6.5% and 4% being the equivalent in the East Midlands area.
This might mean that manufacturing companies in this area are missing out on claiming the relief they are entitled to. Almost £29.6bn has been given in support since the relief began back in 2000; we would encourage all companies to ensure they have checked whether they are entitled to claim their share of this funding.
For eligible companies, these credits can be worth up to almost £250 in tax saved for every £1000 of qualifying expenditure. Companies which are loss making can also benefit by exchanging losses for a cash payment from HMRC.
Eligibility indicators
In the manufacturing sector, good indicators that qualifying R&D activity might be taking place is where a company is developing new products or new manufacturing processes or making improvements to existing versions. This could be driven by customer demand, regulatory changes, the need to reduce costs or energy consumption, the ability to recycle, etc. – the drivers for the development are many and diverse.
The key is that the company is undertaking technologically challenging work to advance technology in their field. For example, a recent claim we have submitted for a manufacturer generated a tax saving of £109k for their work on Plastic products.
How much could be reclaimed?
If you are already claiming R&D tax relief, then the recent statistics highlight a point for you to consider - 18% of all claims made by SMEs are for claims of less than £5k. Whilst every case is different, and £5k can make a significant difference to some companies, this is surprising and not in line with our experience of the market. Typically, we see tax savings around the £30k mark and upwards and so it may be that some companies are not maximising their claims. If you feel your claim is small, it may be worth obtaining an independent review to ensure you aren’t missing out.
A simple solution
Our Radius team are specialists in preparing and submitting R&D tax relief claims and follow a simple three step processes to minimise the amount of time the business needs to spend producing the claim. Our team includes an ex-HMRC R&D Inspector for added reassurance, who will maximise the relief you can claim within the rules set out in the legislation. We have a 100% success rate and have never had a claim turned down.
If you have any questions, please get in touch with a member of our Radius team and Claim your free consultation.
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