New statistics from HMRC have revealed there was a 22 per cent year-on-year rise in the number of claims for research and development (R&D) tax credits submitted by East Midlands companies in 2018-19, with the level of tax relief claimed also rising by 33 per cent.
In total, 3,805 R&D claims were submitted in 2018-19, which amounted to a total of £240m in tax relief being secured by businesses across the region, with average claims in excess of £60k.
UK-wide, over 59,000 claimants have received £5.3bn of tax relief, an increase of £1bn from the previous year.
'The increase in the number of claims and value of support points towards the continued importance of R&D tax credits in the East Midlands. Whilst it is encouraging to see the increase, there was not the exponential growth I would have expected for what was seen as the fastest growing economy of any region in the UK last year and the level of innovation taking place. R&D activity is at the heart of the region – whether it is the development of the modern jet engine, significant developments in low carbon vehicles or global satellite navigation applications.
‘The growth in R&D tax credits has been driven largely by SME claims and with the number of mid-market businesses in the region covering a wide range of sectors, together with several research groups at six established universities, it is clearly evident that more work can be done to raise awareness and encourage businesses to take advantage of this generous tax relief.’
First introduced in 2000, the 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 300,000 claims have been made, with £33.3bn 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 FY20). For large companies, where the R&D Expenditure Credit (RDEC) regime applies, the relief is now worth 13 per cent pre-tax (or 10.53 per cent post-tax), having increased 1% in April this year.