HMRC's latest R&D tax credits statistics
We share our response to the latest statistics released by HMRC in relation to the R&D tax relief schemes.
Whilst the latest report from HMRC (September 2015) doesn’t share any particularly ground-breaking insights, there are a few significant ‘takeaways’ from the report:
It’s positive to note a 23% increase in SME claims for the period covering 2013-14. However, disappointingly, this still only represents 0.0036% of the 5.2 million population of UK SMEs*. Whilst it’s true not every single one of these SMEs will qualify for the scheme, we are sure there are still thousands, if not millions, of innovators out there who are yet to benefit.
Whilst HMRC themselves state that these regional statistics should be taken with a pinch of salt, we believe it’s still important to note the significant North-South divide in claimants. In total there were 2,255 claims made across the North East and North West, compared to 7,015 in London, the South East and South West. Naturally these figures will be skewed to some extent by companies having their registered offices in locations other than their operational base, many of which may be registered in London. However, we don’t believe this will entirely account for the disparity between claimants in the North and South of the UK. We also don’t accept that there are just less innovators in the North. Clearly more awareness of the R&D schemes is still needed in different regions of the UK.
This latest report shows that 76% of claims are made by manufacturing businesses. Whilst manufacturing is an R&D-heavy industry, it is certainly not the only one. The R&D tax schemes are open to all sectors, and although there will be some with more R&D expenditure than others, we would expect to see a wider and more balanced spread across different industries. What we often find is that greater awareness of the eligibility criteria is required, and many of our clients were previously unaware of the applicability of the scheme to their business before we met them.
Uptake of R&DEC
It’s positive to see so many large companies already taking advantage of the new R&D Expenditure Credit (RDEC). The report shows that in the 2013/14 fiscal year the same amount of expenditure has been claimed under RDEC as R&D tax relief. This is an encouraging sign as we move closer to the 2016 deadline when R&D tax relief for large companies will be scrapped in favour of the RDEC scheme for any expenditure incurred from 1st April 2016. It will still be an education process to ensure that all eligible organisations are aware of the increased benefit available under the RDEC scheme to encourage them to make the move across to this scheme sooner rather than later.
Whilst there are clearly areas for improvement, and greater awareness is still needed in many industries, it is positive to see the growth and success of this generous scheme continue.
*Federation of Small Businesses .