British businesses are using R&D tax credits at a record rate, according to the latest HMRC statistics. The data shows a 22% increase in the number of SME claims over the past year.
In total, small to medium firms claimed £905m in cash payments from HMRC in 2015/16. Alongside the large company R&D scheme and the Research and Development Expenditure Credit (RDEC), the figure handed out in 15/16 swells to £2.78bn. Average claim values are up across the board, too.
But despite these healthy statistics, Jenny Tragner, director at R&D tax credit consultancy ForrestBrown, still feels the scheme is being underutilised. “We see that day-in-day-out,” Tragner told AccountingWEB. “Either businesses just didn’t know about the scheme, or they thought they didn’t qualify. There are still a lot of companies that aren’t claiming that should”.
But Tragner, a member of HMRC’s R&D consultative committee, is satisfied that things are progressing. Specifically, many businesses are now repeat claimants. Tragner says companies are becoming more comfortable with capturing qualifying projects and expenditure, and are putting in place better processes.
“We’ve also seen the companies we work with start to change,” continued Tragner. “They are becoming comfortable with identifying what relief they are going to get year-on-year. They can now factor that into investment and day-to-day decisions.”
Another noteworthy morsel from the government statistics is RDEC’s second life as a tool for SMEs. The credit was initially designed for use by large companies, in particular businesses that missed out on relief because they were loss-making.
But the stats show that there’s been an 850% increase in the amount of relief claimed by SMEs using RDEC since its introduction in 2013.
With the number of SMEs now claiming under RDEC, Tragner says she’d like to see a move to simplify the landscape. “We have lots of complexity in terms of running two different mechanisms of relief,” she says. “We’d like to see the government simplify it by putting everyone onto the same model.
“Still have different rates, so you have more generous rates for SMEs, but have the same model so people can get more comfortable with the different rules.”
About Francois Badenhorst
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