£5.3bn in R&D support claimed so far this year. And numbers are set to rise

Since its inception 20 years ago, Research and Development (R&D) Tax Relief has been fuelling innovation across the UK, helping to bring some really ground-breaking ideas to life. Within this time, HMRC has given out a huge £33.3bn through the initiative across 300,000 claims.

Crisis is often a catalyst for change and innovation, and this year is living proof of that. Despite the hardship that 2020 has brought, we’ve seen businesses across the country adopt innovative approaches to adapt and thrive in these times of uncertainty, with some overhauling their operations entirely to develop ventilators and/or PPE.

By significantly lowering eligible companies’ corporation tax liability, or in some cases, offering a tax credit, the relief can open new doors for innovating and forward-thinking businesses. Hopefully we will see the amount of relief rise further in the next year, with more businesses thinking outside of the box during the recovery period.

£5.3bn in support so far

As HMRC are still expecting to receive more tax returns, the R&D statistics for the year haven’t yet been finalised. However, the statistics to date show that £5.3.bn of R&D support has been given out to nearly 60,000 claimants so far. Which is already 3.9% more than the total given out in the year prior.

HMRC is expecting these numbers to rise before spring 2021, estimating that once all the returns have been completed and processed the final figure will stand at around £6.3bn.

It’s encouraging to see that R&D claims are rising on the whole. With the average SME claim coming in at £57K, the relief could be vital to many struggling businesses in the year ahead.

R&D relief in the North East still lagging behind

However, like last year, our region is still lagging behind. So far the North East has the lowest number of claims and the least amount of R&D relief claimed in England. Even though the average R&D claim is lower in the North East than the national average, coming in at just over £40K, the relief can still be an invaluable opportunity. 

It’s disappointing to see that so many businesses are missing out on the relief, especially given that our region is a hub of innovation, having entire organisations dedicated to R&D, like NET Park Durham and Newcastle Helix. So there is a significant opportunity to be had in our region when it comes to R&D tax relief.

Which industries can claim for the relief?

Irrespective of the industry in which you operate, if you’re developing or advancing a new product or service you could qualify for R&D tax relief.

2018/19 saw a huge uplift in software and IT claims. This is hardly surprising, as more businesses are constantly searching for digital solutions to stay ahead of the game and their competition. Looking towards next year’s statistics, it’s likely that software claims will rise further still, with the current climate forcing businesses to operate embrace new, more agile ways of working – technology can often be the solution to this problem.

The professional, scientific and technical sector have also claimed a huge amount of R&D this year, 20% to be exact. Our region is no stranger to this sector, with our ever-growing engineering industry. 

The year ahead

As we look towards the uncertain year ahead of us, innovation will undoubtedly become even more crucial as businesses look to reset and rebuild. R&D tax credits can be invaluable to business owners, but it has never been more important to ensure businesses are receiving the accurate advice.

With awareness of the relief rising, and more people turning to R&D, the potential for poor quality advice and inaccurate claims increases. Recently, we have seen many instances of businesses receiving poor advice from unregulated firms, which has led to the submission of improper claims to HMRC.

The harsh reality is that if something is to go wrong with an R&D claim it is often the claimant who is left to clean up the mess – not the advisor. The likelihood is that any erroneous claims will have to be repaid, along with potential penalties and interest.

R&D tax credits at Haines Watts

As a team made up of ex-HMRC inspectors, qualified chartered tax advisors and sector specialists, our Incentives and Reliefs team are on hand to advise you on R&D. If you need support with your R&D claim, please get in touch to see how we can help.