Before identifying what the value of R&D tax credits might be to your company, it’s worth noting that the UK Government’s R&D tax credits scheme is primarily a corporation tax relief scheme. In some cases, a SME (Small or Medium sized Enterprise) can first use its R&D tax credits to reduce its tax bill to zero and then take the rest as a cash payment.
Government statistics published in 2013 indicated that the average claim value for a SME was around £43,000 per year. The latest statistics indicate that this level has increased, which is not surprising as the scheme has been improved several times over the past few years.
Typically our clients are claiming anything between £10,000 and £150,000 per year in cash benefits – that is money they would not have if they had not claimed R&D tax credits/relief.
New Government statistics show a significant increase in R&D claim values.
HMRC recently released their latest annual Research and Development Tax Relief Statistics and the trend is very good, the number of claims is up, a massive 30% increase for SMEs over the previous year, and the amount being claimed is also higher.
- By the end of 2013, more than 28,500 companies had made claims under the SME scheme since its introduction in 2001.
- In 2012/13 alone nearly £1.4 billion of support was claimed of which £600m went to SMEs, the remainder (£770m) going to large companies.
Where are the beneficiary companies based?
More claims and a greater share of the benefits go to companies with a registered office in London, the South East or the East of England (46.6% of all claims and 65.9% of the total amount claimed). However the R&D activity of some companies, especially large companies, will take place in a different location from their registered office, so these statistics may give a distorted picture.
Who is claiming?
The ‘Manufacturing’, ‘Professional, Scientific and Technical’, and ‘Information and Communication’ sectors had the greatest volume of claims for 2012Ã¢â‚¬Â13 (77.1% of claims and 80% of the total amount claimed). However, these figures should be treated with caution as the industry classifications used may not reflect the industry
in which the R&D activity itself is carried out.
Under the R&D tax credits scheme, SMEs are companies with less than 500 employees and either less than 100m euros turnover or 86 million euros on their balance sheet. There is no reason why very small companies should not make a claim and many have made successful claims.