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Research and Development Tax Relief supporting spend by UK businesses on R&D

There are many funding and grant schemes available which allow businesses to accelerate new ideas through product development and provide a cashflow injection to support business growth. Research and Development funding is available via grant schemes – such as Horizon 2020 – and tax incentives as R&D Tax Credits. These can be used in conjunction with each other, although special rules apply when a company claims R&D Tax Credits having already received notified state aid for R&D.

However, many companies are still not fully utilising tax incentives and funding for innovation, leading to thousands of £’s being left unclaimed. In our experience, businesses have been reluctant to claim due to combination of factors, including a lack of understanding of which activities qualify, poor advice and the perception that the process is excessively time-consuming. We would urge business owners to review their entitlement – even if they think they don’t qualify – using a specialist who will be able to advise accordingly. Many who thought they weren’t entitled to claim are often pleasantly surprised.

Seeking professional advice is paramount in ensuring companies receive their full entitlement through the submission of a robust and comprehensive support documentation package is submitted. In the case of claiming R&D Tax Credits, businesses should also ensure their service provider covers the administration of the HMRC enquiry process as part of the service.

Since its inception in 2000, Research and Development Tax Relief has been claimed by over 300,000 companies who have benefitted from £26.9bn of funding. During 2016-17 alone (the last year for which HMRC stats are available), £4.4bn was awarded to businesses for their efforts in innovation.

UK business have continually invested more on R&D, with expenditure increasing every year since 2012, although this rate of growth needs to improve substantially if the Government target to ‘raise investment on R&D to 2.4% of GDP by 2027’ is going to be achieved. R&D spend is currently around 1.2% of GDP and we urge the Government to increase innovation investment significantly to provide the much-needed growth injection required.

The Office for National Statistics (ONS) recently released the latest statistics on R&D spend for 2018, with the main headlines being:

  • Expenditure on Research and Development (R&D) performed by UK businesses continued to grow, expanding by £1.4 billion to £25.0 billion, an increase of 5.8%.
  • Aerospace was the product group with the largest increase in R&D expenditure of £210 million, an increase of 14%.
  • The East of England had the largest growth in the value of regional expenditure, increasing by £464 million (9.9%) to £5.1 billion.
  • Total UK business employment in R&D grew by 7.3% to reach a quarter of a million full-time equivalents for the first time.
  • Overseas funding of R&D continues to decline, falling 20% (£813 million) since 2014 to £3.2 billion.

 

The full statistics can be accessed here.