New data shows New data shows 28 per cent increase in R&D claims by East Midland companies

New data shows New data shows 28 per cent increase in R&D claims by East Midland companies

New data published by HMRC has revealed a number of positive trends, pointing to the continued importance of R&D tax credits in the East Midlands.

In total, businesses across the East Midlands submitted 3,120 R&D claims in 2017-2018, claiming some £180m in tax relief, with average claims in excess of £55k. Compared to the data reported for the previous year published in May 2018, this represents a 28 per cent rise in the number of claims and a 24 per cent rise in the amounts claimed in R&D tax credits.*

There was a familiar trend nationally in that manufacturing, information and communication, and professional scientific and technical sectors remained the largest beneficiaries and this was also mirrored in the East Midlands, with manufacturing sector claims increasing by 29%, but the standout sector was construction where the number of claims submitted almost doubling year on year.

Across the country, the value of relief claimed by businesses increased by approximately 5%. London continues to dominate in terms of the average size of claims (in excess of £100k), but the East Midlands is lagging significantly behind, with average claims in the region of £58k. 
R&D tax credits are a tax relief designed to encourage greater R&D spending, leading in turn to greater investment in innovation. They work by either reducing a company’s liability to corporation tax or providing a cash injection for companies without a tax liability (i.e. loss-making businesses).

Commenting on the new numbers, Sheetal Sanghvi, R&D Tax Partner at RSM said:

"The East Midlands region was one of the very few regions that saw the number of claims increase by over 25%. Whilst it is encouraging to see this consistent trends each year, with the overall number of claims increasing, it is disappointing to see that the average claim value is significantly lower than other regions despite the level of R&D activity being undertaking in the East Midlands - there is clearly more work to do and the potential for claims to be further maximised.

"With more emphasis on sustainability and gaining efficiency through innovation, it is no surprise that the construction sector has seen the highest proportional increase in the number of claims submitted to HMRC, clearly showing a fundamental change of perception in the industry.

"The current Covid-19 pandemic, which is impacting the entire global economy has meant that managing cash flow effectively has never been more important to companies, and R&D tax credits are a valuable means of unlocking cash for UK companies. We recognise that businesses will be experiencing real strain in capacity, but management teams shouldn’t overlook the opportunity to bring forward their claim process, submitting claims as early as possible whilst also exploring earlier years to ensure claims have been maximised."

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