Are North West companies losing out on valuable R&D tax credits?

R&D is not restricted to research being conducted in laboratories

Posted by Darren Grimes

Tax Director

  • T: 0151 243 1200
Mon 20th, Apr

The R&D Tax Credits regime allows companies to claim an enhanced corporation tax deduction on eligible R&D expenditure. Where a company is loss making, it may also be eligible for a tax repayment on its R&D expenditure. Despite the advantages of the regime, it is the general case that North West companies are not utilising this tax benefit as much as their competitors in other regions around the country.

In the most recent figures  released by HM Revenue and Customs, the North West lies fifth in the national league table of regions when it comes to making R&D claims. In fact, 66% of the total £1.4 billion of R&D tax credits claimed takes place in London, the South East and the East of England. North West companies claim just £85 million of R&D tax credits. The level of claims in Wales is even lower, with only £20 million of R&D tax credits claimed for the entire country.

R&D is not restricted to research being conducted in laboratories by men in white coats. It covers most industry sectors and applies to a wide range of activities.

Where companies are:

  • Undertaking the development of new products/processes (including systems/software development).
  • Aiming to duplicate existing products or processes in an appreciably improved way.
  • Making advancements in its field of work.
  • Employing technical staff, engineers, software developers or scientists.
  • Spending money on staff costs, consumables or subcontractors costs in the above.

 

Then they may be able to make an R&D claim. For Small and Medium Sized Enterprises, up to 225% (230% from 1 April 2015) of the R&D expenditure will be eligible for tax relief.

Based on the statistics, companies in the south of the UK have identified the benefits of the R&D regime and have generated tax savings in their businesses. It is time for North West and Welsh companies to look at this valuable tax relief again to prevent themselves being at a competitive disadvantage.

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