Tech incorporations increase 36%

The number of new tech start-ups in the East Midlands increased by 36% in quarter three this year compared to quarter one data.

A total of 309 software development and games businesses have been incorporated so far this year in the region, according to Companies House and analysed by audit, tax and consulting firm RSM.

Simon Browning, regional head of media and tech sector at RSM, said: “At a time when many sectors are feeling crippled by the impact of the pandemic, it is encouraging to see the tech industry in our region experiencing growth. This can be attributed in part to the lockdown, which drove an increase in demand for technology to support remote working. The huge increase in working from home, as well as leisure time spent at home, has meant far greater need for digital technology and a growing demand for digital entertainment.”

In a further boost across all sectors, new statistics from HMRC revealed a 22% 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 a third (33%).

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 exceeding £63,000.

Historically, software and tech businesses have represented around 34% of these claims.

UK-wide, over 59,000 claimants have received £5.3bn of tax relief, an increase of £1bn from the previous year.

HMRC recently published a consultation document to explore how the scope of qualifying expenditure for research and development (R&D) tax credits ought to evolve to reflect the modern trends in R&D.

Sheetal Sanghvi, regional head of R&D, RSM said: “We are encouraged that the Government has sought to consult widely on how the scope of expenditure qualifying for R&D tax credits should evolve alongside technology in areas such as cloud computing and data. This will better reflect the expenditure incurred by many innovative businesses in the sector and would incentivise businesses to undertake more R&D.

“Research and development plays a crucial role in our region’s long-term economic growth, and in the current climate, it is even more important that the UK has a tax regime that is internationally competitive and supports future investment in innovation.”