Home News Are you making the most of R&D tax reliefs?

Are you making the most of R&D tax reliefs?


HM Revenue and Customs (HMRC) has reported a sharp increase in the number of R&D tax relief claims.

From just over 15,000 claims in 2012-13, the annual total broke through 40,000 in 2015-16 and has stayed at that level since.

Click here to listen to our podcast explaining how R&D tax reliefs work

Rob Johnston, Chief Executive of Cumbria Chamber of Commerce, said: “This is a valuable tax break that we highlighted to businesses in a podcast back in December.

“The latest statistics from HMRC suggest more and more businesses are getting wise to it.

“The definition of R&D in this context is quite wide. For example, it could be a project to research or develop a new process, product or service, or improve on an existing one.

Click here for an overview of R&D tax reliefs

“I’d urge any business that carries out qualifying R&D to take a close look to see if they can benefit.”

Rob added: “R&D tax relief is designed to encourage greater R&D spending, leading to greater investment in innovation, which is one of the priorities in the Government’s Industrial Strategy.

Click here for info on SME R&D relief

“There are two schemes for claiming relief, one for SMEs, another for larger companies – Research and Development Expenditure Credits (RDEC).”

“They work by reducing a company’s tax bill by an amount equal to a percentage of the company’s qualifying R&D expenditure or by the payment of a credit, again linked to the company’s qualifying R&D expenditure.”

The bulk of claims – around 30,000 a year – are for the SME scheme.

Click here for info on the RDEC

The take up has increased sharply following changes in 2012 when the requirement for a minimum R&D expenditure of £10,000 was removed, making more companies eligible to apply.

Claims are concentrated in companies based in London and the South East – although this may reflect the location of the registered office while R&D activity takes place elsewhere.

The manufacturing, professional, scientific and technical, and information and communication sectors are responsible for the greatest volume of claims.

Click here for info on the patent box

There has also been an increase in the number of companies claiming relief under the patent box, which enables them to apply a lower rate of corporation tax to profits earned after April 1, 2013, from their patented inventions and equivalent forms of intellectual property.

More than 1,000 businesses a year benefit from this.

To find out more, speak to your accountant or call Cumbria Business Growth Hub on 0844 257 84 50.

ERDFThe funding that supports the Growth Hub this comes from a range of sources including Cumbria Chamber of Commerce, the European Regional Development Fund, Allerdale Borough Council (Sellafield Ltd’s Allerdale SIIF, distributed by Allerdale Borough Council), Barrow Borough Council (FEDF Coastal Communities Fund Supply Chain Initiative, the Coastal Communities Fund is funded by the Government with income from the Crown Estates marine assets; it is delivered by the Big Lottery Fund on behalf of UK Government), Carlisle City Council, Eden District Council, South Lakeland District Council and Cumbria LEP.

The Growth Hub is receiving up to £2,528,767 of funding from the England European Regional Development Fund as part of the European Structural and Investment Funds Growth Programme 2014-2020.  The Ministry for Housing Communities and Local Government is the Managing Authority for European Regional Development Fund. Established by the European Union, the European Regional Development Fund helps local areas stimulate their economic development by investing in projects which will support innovation, businesses, create jobs and local community regenerations. For more information, click here.

© Cumbria Chamber of Commerce


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