East Midlands SMEs still missing out on £billions of R&D tax credits

Despite being amongst the UK’s most innovative businesses, East Midlands SMEs are missing out on a share of around £4 billion of unclaimed tax, according to HMRC figures. R&D tax credits expert Ian Batkin, partner at Luvo Financial, explains.

Innovative SMEs investing in R&D stand to reclaim an average of £50,000, but East Midlands businesses are lagging behind the national average by more than £10,000, according to the government’s latest Research and Development Tax Credit Statistics Report (10 October 2019).

Across the UK, over 300,000 R&D tax credits scheme claims have been made since it was launched in 2000, around £27 billion has been paid to UK SMEs in tax relief, and the average value of an individual SME claim now stands at £50,000.

Whilst the number of claims has broadly increased year-on-year, it is still clear that in total significantly less than 10 per cent of all eligible SMEs are claiming; this means at least 90 per cent are simply missing out on reward and financial support for their R&D and innovation.

The Midlands is home to around 100,000 SMEs that have the potential to claim R&D tax credits but aren’t currently doing so. By not claiming, they are leaving around £4 billion of unclaimed tax on the HMRC table, despite each of them being legally and legitimately entitled to it.

The market and/or sector that an SME operates within is irrelevant, as the latest figures confirm. More than 60 per cent of claims have been made by companies in the manufacturing, professional, scientific and technical, and information and communications sectors, with a rise of 15 per cent in first-time applicants from the agriculture, transport and storage, financial and insurance, education, health and social work, the arts, entertainment and recreation sectors, proving that when it comes to claiming R&D tax credits, it’s what you do that matters.

Making the best claim

According to HMRC’s latest statistics, claims by East Midlands SMEs have increased by around 15 per cent year-on-year, with average claim values up 3 per cent. But these are still 20 per cent lower than the national average claim value, so even more East Midlands-based companies could claim, and those that already do, could claim more.

With qualifying businesses able to recover up to a third of what they’ve spent on eligible R&D, it’s important to put together a ‘right first time’ R&D tax credits claim. Eligible East Midlands businesses should clearly be claiming against their investment in R&D, but claiming in the right way is vital. Using a specialist is recommended to maximise the claim and minimise any risks and the time involved.

Whether an accountant acting on behalf of a client or a business considering eligibility, support from an independent R&D tax credits specialist is the fastest and surest way of making a successful claim. Luvo provides support for accountants making R&D tax credits claims for clients and also works extensively with SMEs in a wide variety of sectors.

The distinct advantages of using an independent R&D Tax Credits specialist, include:

• Reduce risk – Luvo Financial’s expert team understands, lives and breathes R&D tax, knows what is eligible and how to go about best presenting the claim. Supporting R&D tax credits claims represents more than 90 per cent of what we do, and by advocating only eligible legitimate claims, Luvo has a 100 per cent claims success record.
• Maximise claims – as R&D tax experts, we work with clients and their accountants to maximise claims. We accurately understand the relevant legislation and how HMRC currently interprets this, and know what other businesses have claimed, so know exactly when a proposed claim sits outside the norm.
• Minimise time – we reduce the amount of time that claimants need to spend in pulling together a R&D tax claim. We quickly understand the claimants’ business and what can and can’t be claimed for, and tell it the way it is. Our team efficiently and effectively pull together the summary of allowable, claimable costs and the technical justification needed to support the claim, so that claimants spend less time on it and more time on running their business.

Luvo Financial was founded in 2015 by its partners Ian Batkin and Vicki White, both qualified accountants. For more information visit: www.luvofinancial.co.uk,Tel: 01902 244210, E: enquiries@luvofinancial.co.uk

Photograph by Dave Warren/Picture Team.