UK companies losing out on research and development tax savings

Companies in some regions of the UK are losing out on millions of pounds of R&D tax savings every year, a new study reveals.

Of the 22,445 claims across the UK totalling £2.45billion in R&D tax benefits, only 2,200 claims came from companies in the North West

Of the 22,445 claims across the UK totalling £2.45billion in tax benefits, only 2,200 claims came from companies in the North West

Companies in some regions of the UK are losing out on millions of pounds of research and development (R&D) tax savings every year compared to their counterparts across the rest of the UK, according to R&D tax relief specialist Jumpstart.

Despite an increase of over one third (37 per cent) year on year in the total R&D tax credits claimed in 2014-2015, analysis of the latest HMRC figures for FYE 2015, released today, shows that North West companies accounted for just 9.9 per cent of total claims and a mere 5.9 per cent of the total tax benefits claimed.

Russell McGrath, client engagement manager for Jumpstart in the North West, comments, ‘Whilst it’s encouraging to see many companies in the North West availing of the R&D Tax Credits scheme, these latest HMRC figures are an alarming demonstration of just how much North West companies are losing out in terms of tax savings compared to companies throughout the rest of the UK. Of the 22,445 claims across the UK totalling £2.45 billion in tax benefits, only 2,200 claims came from companies in the North West and resulted in just £130 million back.’

Of the 2,200 North West claims, 1,865 were from the SME R&D scheme and the remainder were claimed under schemes for large companies.

London and the South East of England made the highest number of claims in the year. While London companies accounted for 19.1 per cent of all claims and 32.7 per cent of the total tax relief claimed, the South East of England accounted for 17.9 per cent of claims and 18.5 per cent of the total claimed.

The figures show a concentration of claims in the ‘manufacturing’ (30.5 per cent of claims and 35.5 per cent of total claimed); ‘professional, scientific & technical’ (19.5 per cent of claims and 24.2 per cent of total claimed); and ‘information & communication’ (24.8 per cent of claims and 17.7 per cent of total claimed) sectors across the UK.

Mr McGrath continues, ‘Whilst uptake of the UK government’s research and development tax relief scheme is increasing across the UK as a whole and is very healthy in certain regions, companies in the North West are clearly not reaping the full benefits of the scheme.

‘Furthermore, some companies could be under claiming or over claiming because their technical project activities and expenditures are not being accurately interpreted against legislation. As well as the introduction of increased scrutiny over such claims by HMRC, the process of claiming is very much a technical assessment, so it is important that companies instruct a specialist advisor to handle this for them.

McGrath concludes, ‘There is huge scope for a much more focused uptake by companies in the North West. I would urge firms here to get in touch with Jumpstart or their advisors to find out more about how they can make significant tax savings through R&D tax credits if they are making a profit or get a Cash Credit if they are loss making.’

Further reading on R&D

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