R&D Tax Credits for SMEs – are you missing out?

Insights - October 2018

Figures published by HMRC last week indicated that of the 39,960 claimed in Tax Relief from 2016-17, 34,060 claims were awarded to SMEs. That amounts to more than five in every six tax credit applications coming from small and mid-sized businesses and the filing of £1.8 billion of claims. The current figures are incomplete owing to an extended deadline for SME claims, meaning the total claims, along with the number of first time claimants, will likely rise further.

The Government-run research and development tax relief scheme aims to promote innovation by reducing a company’s tax bill. Businesses can use it to cut their corporation tax by an amount that is equal to a percentage of the company’s qualifying R&D expenditure. This means that R&D tax credit rates are the equivalent of up to 33p for every £1 of qualifying expenditure.

Why does the government award R&D tax credits?

The UK Government recognises that if you’re investing your company’s resources into innovation, then you should be rewarded for it – and with good reason. Based on analysis carried out by HMRC, the £3.5billion distributed last year could go on to stimulate up to £8.1 billion of additional investment in Research and Development.

Thanks to the innovative acumen of UK businesses, many organisations reinvest their R&D Tax Credits into further stimulating their product and service development which can involve hiring new staff, investing in new infrastructure and the growth of their premises or global reach. As a result, the UK’s overall productivity benefits and the tax credits serve as a catalyst for further innovation.

 

What SME sectors are claiming most?

The manufacturing sector has slipped behind the information, communications and technology firms in its number of applications for R&D Tax Relief in 2016-17 for the first time since the scheme’s inception in 2000. Whilst this dip in applications will lead to speculation that a decline in UK manufacturing in response to Brexit anxieties could be imminent it is worth noting that the sector has been the best performing for R&D Tax Credits received for the last five years, securing over 39,000 of the 138,195 claims made in that period.

The largest average claim for the SME sector in came from the arts, entertainment and recreation industry at £111,111. Although the number of claims in this sector only represents just over 1% of the total claims made, the 360 companies that have done so have reaped the rewards to almost double the value of all of the sectors combined.

Unsurprisingly the professional, scientific and technical sector was also well- represented in the number of claims awarded, with 26% of the tax relief claimed via the SME R&D tax-credit incentive going to companies in this sector with an average claim of £71,649.

 

Can Your Business afford to miss out?

Despite the number of SME’s claiming R&D Tax Credits rising, there are still thousands of companies missing out. Antoine Abbatucci, UK Managing Director of global R&D Tax Consultancy F. Initiatives, said of the results “Whilst it is encouraging to see the number of applications for R&D Tax Relief rising, the increased scrutiny on claims by HMRC makes it more important than ever for businesses to take the right advice when making a claim. At F. Initiatives we offer a traditional bespoke consultancy service as well as an easy to use online system for smaller claims – but importantly both come with dedicated expertise from our science and technology specialists who have dealt with 100’s of successful R&D Tax claims. As a result, we have a 100% conversion rate for claims submitted in the UK.”

For an informal chat on how you can claim R&D Tax Credits please contact F. Initiatives on 0207 653 1921 or email contact@f-initiatives.uk

R&D Tax Credits Advisors. R&D Tax Credits Experts.