HMRC has published their annual statistics for R&D claims showing a sizeable 16% increase from the previous year. The rise relates to the 2019/20 tax year and is primarily due to an increase in the number of claims made by small and medium sized enterprises.
R&D tax credits are a Government approved tax relief to incentivise investment in R&D and innovation. They work by reducing a company’s tax bill and can even result in cash back for companies in a loss-making position.
The latest data shows that companies in the South West region submitted approximately 6,500 claims in 2019/20, one thousand more than in the prior year. The total amount of R&D support claimed in the region was £355 million compared to £310 million for 2018/19.
It should also be noted that the actual claims for the region may be even higher, as the figures are reported by the location of the registered office of the business which may not necessarily be where the R&D activity is taken place.
The total value of R&D expenditure against which claims were made was £7.4 billion in 2019/20 a 19% increase from the prior year. As the statistics run up for the year prior to the start of the COVID-19 pandemic, it will be interesting to see what effect this has had on expenditure and the knock-on effect for claims in 2020/21.
The most popular industries for claims are in the IT, manufacturing, and scientific sectors. It is a common misconception that R&D claims are only restricted to these industries, however, any company may be able to qualify if they are developing new products or processes.
89% of all R&D claims made were by small and medium sized enterprises. Following the R&D consultation earlier this year on the possible reform of the scheme, it will be interesting to see how far the Government will go to overhaul the regime for these companies and whether the overall level of support will be maintained as a result.
Please get in touch with our Innovation team for an initial consultation to explore whether your benefit could be eligible to make a claim.