R&D tax credit claims up 20%

There has been a 20% increase in the total number of claims for R&D tax credits, according to the latest HMRC figures, primarily driven by a rise in the number of SME claims, with the department forced to add extra resource to meet the demand

 

HMRC statistics show that in 2016-17 the number of claims for R&D tax credits rose to 52,335, of which 45,045 related to SMEs, an increase of 22% from 2015-16.

The total amount of R&D support claimed increased to £4.4bn in 2016-17, up by 14% from the previous year. Since being launched in 2000, over 300,000 claims have been made, with £26.9bn claimed in tax relief.

The figure show R&D claims are concentrated in companies with a registered office in London, the South East or the East of England (46% of all claims and 61% of the total amount claimed for 2017-18). However, HMRC points out that the regional split is based on the registered head office location so may not be where all of the R&D activity takes place.

The manufacturing, professional, scientific and technical, and information and communication sectors continued to have the greatest volume of claims, making up a total of 68% of claims and 73% of the total amount claimed for 2017-18.

Analysis by RSM identified that just over 40% of claims are made by companies less than 10 years old. The firm says this suggests that despite continued efforts by both HMRC and the adviser community, businesses still perceive R&D tax credits to be predominantly for young companies. However, more established companies continue to innovate year on year to remain globally competitive, and may be failing to recognise their entitlement to claim.

RSM also drew attention to backlogs in processing, caused by the increase in claimants.

James Tetley, partner and national head of R&D at RSM said: ‘This rise in claims has proved challenging for HMRC and companies applying for R&D tax reliefs have experienced significant delays in the processing of claims, sometimes up to nine months.

'To the relief of claimants and their advisers, new resource has cleared the backlog and HMRC is now better equipped to handle the higher levels of claims that we now see.

‘From 1 October 2019, the processing of claims has moved to a larger team in Cardiff which should be better able to cope with the fluctuations in demand.

‘Prompt processing is crucial to help reduce the time lag between R&D spend and receiving the relief. This is particularly important for early stage businesses where cashflow is often an issue.’ 

Corporate tax: Research and Development Tax Credit details are here.

By Pat Sweet

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