SMEs urged to make most of R&D tax schemes
FIGURES from HM Revenue and Customs reveal that SMEs in the North West are trailing other regions when it comes to the amount they are claiming back from research and development tax breaks.
The incentives are designed to encourage greater R&D investment and, in turn, greater investment in innovation. They work by reducing a company’s tax bill based on a percentage of the company’s allowable R&D expenditure.
In the latest year for which figures are available, 2011-12, the number of claims for R&D tax credits rose in the UK from the previous year by 16.5% to 12,190, representing £1.2bn of tax support, based on an £11.9bn of R&D expenditure.
North West SMEs made 995 claims in the year under review – behind the South East (1,850), London (1,650) and the East of England (1,035).
Local SMEs did however make more claims than those in the West Midlands (820), the South West (810), Yorkshire and The Humber (695) and the East Midlands (630). The North East region was one of the lowest claimants, with only 325 claims.
By value, the average cash benefit claimed by a North West SME was £29,000 – well behind London (£61,000); the East of England (£56,000); the South East (£49,000); Scotland (£41,000). Other regions with the lowest average claims include Yorkshire and the Humber (£27,000); Wales (£28,000) and the West Midlands (£28,000).
Of the £1.2bn tax support, only £420m was paid out to SMEs with £758m paid to larger enterprises. Only 4% of the large enterprises are located in the North West, with London and the South East combined taking a 63% share.
Commenting on the findings Ian Rowland, an R&D tax specialist based at the Manchester office of accountants Grant Thornton said: “In the grand scheme of things the region’s figures might not look too bad for SMEs. But places like Manchester and Liverpool increasingly prides themselves on technology and innovation – so it would be encouraging to see the figures for the number of local companies rise.
“The value of the claims also needs to go up. There’s a direct relationship between R&D spend and growth based on innovation. Recent changes to the R&D relief have made it even more valuable for SMEs to claim, and for the first time loss making large enterprises can also claim a cash refund for R&D spend. Also, the recent introduction of the Patent Box, with an effective 10% tax rate, makes now the best time ever for local companies to review the cash breaks that are available.”
