New statistics from HMRC have revealed there was a 17 per cent year-on-year rise in the number of claims for research and development tax credits submitted by South West companies in 2015-16, with the level of support provided rising by four per cent.
The latest data shows that companies in the region submitted 2,040 claims for research and development tax credits in 2015-16, up from 1,750 in 2014-15. The total amount of R&D support claimed rose to £130m, an increase of £5m from the previous year.
The total value of R&D expenditure against which claims were made was £860m in 2015-16.
First introduced in 2000, R&D tax credits are designed as a tax relief to encourage greater R&D spending and innovation. They work by reducing a company’s tax bill by an additional amount depending on the company’s allowable R&D expenditure. Since launch, over 170,000 claims have been made, with almost £16.5bn claimed in tax relief.
Over time, the rate of relief has become more generous and is now worth up to 230 per cent for SMEs. This means that for each £100 of qualifying costs, the corporation tax paid by SMEs on income could be reduced by up to an additional £24.70 (applying 19 per cent UK corporation tax rate for FY17).
Commenting on the figures, Matthew Sewell, tax partner at RSM in Bristol said: ‘The increase in the number of claims and the level of support given to South West companies undertaking eligible R&D is impressive. This reflects a continuing growth in the awareness of these important tax reliefs as well as the positive impact of two changes made by the Government to improve the credits available for SMEs and large companies in 2015-2016.
‘Claims have continued to increase in every area of the UK and the number of first time applicants has again increased dramatically. Companies who have not yet considered R&D tax credits should review their position now, as they may not be taking advantage of the tax reliefs that they are entitled to and this is potentially putting them at a competitive disadvantage.’