R&D Tax Relief continues to be a major investment by the government and is benefiting innovative businesses by an ever increasing amount.
HMRC have recently published their latest annual claim statistics for the year to 31 March 2020, which make for interesting reading, although the sector and regional data is very limited, with further breakdowns expected in Spring 2022.
Key points of interest from the statistics:
- 85,900 claims were made – an increase of 16%. This is driven by a rise in the number of claims by SMEs (small or medium sized enterprises) to 76,225. This includes nearly 20,000 first time claims.
- £7.4 billion of support was awarded – an increase of 19%. This corresponds to £47.5 billion of R&D expenditure – an increase of 15%. Out of this, £4.4 billion is via the SME scheme, an increase of 25%.
The biggest three sectors claiming support are Manufacturing, ICT and “Professional Scientific & Technical”, although the support is available across many more sectors, including many you may not expect. The scope of the relief remains wider than businesses realise so we strongly advise that you discuss your situation with us if you are doing any development work involving the resolution of technical issues, as your business may be eligible to claim a significant sum.
The South West is shown as the sixth largest region in the UK both by number of claims and amount of support.
A striking statistic is that nearly 15,000 claims made were for under £5,000, which suggests a large number of small first time claims, but potentially this is also one of the biggest fraud risk areas.
As the level of support is rising, HMRC are stepping up their compliance activity, and have increased their staff numbers to be able to handle a higher volume of enquiries.
In recent years there has been a huge increase in the number of “boutique” firms claiming to be R&D claim specialists, who can over-promise on claims and then leave their customers high and dry when HMRC come knocking. There are working groups who are now starting to look more closely to decide on the best way to tackle these rogue agents – both by means of targeting them directly, but also by raising awareness in the business world of how to spot them before signing up to often highly restrictive terms and hidden small print.
Through my volunteering with the Chartered Institute of Taxation, I am lucky to be able to sit on a couple of the working groups with HMRC and the Treasury, both in terms of HMRC’s processing capabilities but also on how to tackle fraud and “rogue agents”.
We continue to offer a free, no obligation service to chat through your situation and determine whether your business has a viable claim, and if a claim looks unlikely we will be up front and tell you this. With the potential savings available if you do qualify, it really is worth investing the time to find out. Contact James by emailing firstname.lastname@example.org or call 01242 776000.
Take a look at James’ article following Tax Administration and Maintenance Day which took place on 30 November 2021, when HMRC published a summary of responses to the previous consultation on the reform of R&D Tax Reliefs. James provides a summary of the proposals and next steps here.