New data published by HMRC has revealed a number of positive trends, pointing to the continued importance of R&D tax credits.
In total, businesses across the East of England submitted 4,715 R&D claims in 2017-2018, claiming some £555m in tax relief, with average claims in excess of £115k. Compared to the data reported for the previous year published in May 2018, this represents a 22 per cent rise in the number of claims and a 41 per cent rise in the amounts claimed in R&D tax credits.*
Whilst there was a familiar trend nationally in that manufacturing, information and communication, and professional scientific and technical sectors remained the largest beneficiaries, in the East of England, construction claims increased by staggering 54 per cent and claims in the financial and insurance sector increased by 33 per cent.
R&D tax credits are a tax relief designed to encourage greater R&D spending, leading in turn to greater investment in innovation. They work by either reducing a company’s liability to corporation tax or providing a cash injection for companies without a tax liability (i.e. loss-making businesses).
Commenting on the new numbers, Sheetal Sanghvi, R&D Tax Partner at RSM said: ‘It is encouraging to see consistent trends each year, with overall claims increasing (in number and value) in the East of England. This having a direct benefit on sectors that for years, have failed to capitalise on the opportunity to reduce their net cost of investment. Construction is a perfect example here, but it is also interesting to see the financial and insurance sector growing.’
‘The current coronavirus pandemic, which is impacting the entire global economy has meant that managing cash flow effectively has never been more important to companies, and R&D tax credits are a valuable means of unlocking cash for UK companies. We recognise that businesses will be experiencing real strain in capacity, but management teams shouldn’t overlook the opportunity to bring forward their claim process, submitting claims as early as possible whilst also exploring earlier years to ensure claims have been maximised.'