The revenue recently released R&D data for the previous financial year which shows that R&D claims continue to provide valuable benefits to companies undertaking R&D. The total amount of R&D support claimed by businesses has increased by 25% bringing totals for 2016/17 to £3.7bn, to hit another record high last year.
The total number of claims for R&D credits made by 30 June 2018 in respect of 2016/17 was 39,960, with SMEs accounting for the majority of that figure – at 36,805.
R&D tax relief enables businesses carrying out qualifying R&D to claim an extra corporation tax deduction for certain qualifying expenditure.
This was the most common way for SMEs to claim R&D tax credits in 2016/17, with 18,230 claims made by small firms attempting to reduce their corporation tax liability and 6,810 looking to surrender losses for cash back.
The level of relief available depends on which scheme a business uses.
The relief small/medium sized businesses can claim is 230% of their qualifying R&D costs under the SME scheme from April 2015 and 14.5% payable tax credit.
Larger companies can take advantage of the Research and Development Expenditure Credit (RDEC) scheme, which offers a taxable credit at 12% of qualifying R&D expenditure from 1 January 2018 (previously 11%).
Since the requirement for a minimum R&D expenditure of £10,000 was removed, more businesses meet the criteria to apply for the relief.
The number of SME claims submitted by companies in Wales has risen to 1,185 with £55 million of benefits being claimed. However, Wales is still lagging behind when compared to other UK regions and so there is more to be done in making companies in Wales aware of the benefits.
R&D relief is available to businesses in all industry sectors. The key is that the business is working towards improvements in services, products and processes through technological or scientific advances.
Our specialist R&D team can advise you on your potential eligibility and assist you in making a claim for Research & Development tax relief.
If you are interested in discussing eligibility or a potential application, please contact Denise Roberts in our tax team.