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Rise in number of businesses claiming R&D tax credits

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Rise in number of businesses claiming R&D tax credits

New statistics from HM Revenue & Customs (HMRC) suggest that an ever-increasing number of UK small and medium-sized enterprises (SMEs) are taking advantage of Research and Development (R&D) tax credits.

According to the tax authority’s data, the total number of claims for R&D tax credits soared to 26,255 during the 2015/16 financial year – indicative of a 19 per cent rise over figures recorded in 2014/15.

HMRC has said that the significant increase in claims can be attributed to important changes made to the scheme in recent years – such as the removal of the previous requirement for a minimum R&D expenditure of £10,000 from April 2012.

Since then, changes in 2014/15 have seen the SME payable tax credit rate increased from 11 per cent to 14.5 per cent, while reforms in 2015/16 saw the SME enhanced expenditure rate rise from 125 per cent to 130 per cent.

HMRC has said that together, all of these amendments to the scheme have made it more attractive to SMEs.

Despite this, however, separate research published by Censuswide last month found that more than a third (36 per cent) of UK SMEs do not fully understand R&D tax credits, and wrongly believe that R&D claims are restricted to successful high-tech companies in the science and pharmaceutical sectors.

In reality, R&D tax relief is available to most businesses that have spent time and money ‘developing a new product or process over the past three years’ – and regardless of whether the ‘innovative activity’ itself is successful.

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