New HMRC info paints bigger R&D tax credit picture

17 May 2021 Caroline Hawkins View all News

R&D tax relief is one of the key ways successive UK governments have sought to incentivise companies to innovate.

Supplementary information released by HMRC last month provides a detailed breakdown of claims made by industry and region. But could more companies in our region be claiming this relief?

Why claim R&D Tax Credits?

R&D tax credits have been a key part of the UK tax system for 20 years, with more than £33bn of relief being claimed by innovative companies in that period.

The relief is extremely valuable, being worth up to almost £250 in tax saved for every £1,000 of qualifying expenditure, with loss making companies also being able to benefit by exchanging losses for a cash payment from HMRC.

R&D tax credit uptake continues to grow

The report published last year shows that the number of R&D claims and the amount of relief claimed continues to grow.

This showed that less than £200m out of the total £5.1bn paid out in R&D relief in 2018/19 went to companies in Yorkshire and the Humber, with just over £200m going to companies in the East Midlands.

The supplementary information released last month shows that within Yorkshire and the Humber, 45% of claims made were to companies in West Yorkshire, and only 23% of claims to companies in South Yorkshire.

Within the East Midlands, the split is a little more even with 24% of relief going to companies in Leicester and Leicestershire and roughly 20% of the relief going to companies in each of Northamptonshire, Derby and Derbyshire and Nottingham and Nottinghamshire.

Which sectors are claiming R&D Tax Credits

The information also shows that for both Yorkshire and Humberside and the East Midlands, companies in the manufacturing sector claim the most relief (approximately 34% of claims made, followed by Professional, Scientific and Technical, Information and Communication and Wholesale and Retail Trade.) This is fairly typical of the sector split across the country.

The size of R&D tax credit claims

The research shows that the vast majority of claims in Yorkshire and Humber and the East Midlands is within the claim band of 0-£50,000.

This correlates with the information last year which showed that approximately 34% of all claims made by SMEs are for costs of less than £10k, and that over 10,000 of claims are for costs of less than £5k. To us this high number of small value claims 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.

Contact Radius to learn more

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Radius is a leading specialist in R&D tax relief, with unrivalled knowledge that you won’t find elsewhere. If you pay technical staff to solve technical problems, you may be entitled to around a quarter of the amount you have spent innovating on R&D back in the form of tax relief.

If you are interested in learning more about R&D tax reliefs and what you may be able to claim, speak to Radius today, or find out how much R&D tax relief your company can claim using our R&D tax relief calculator.

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