BLOG: R&D Tax Credits – are Liverpool City Region businesses missing out?

Alastair Cameron, Principal Consultant at Glentarn Consultants and a member of ibd Business Advice Group, explains that Liverpool City Region businesses might not be making the most of the research and development tax credits that are available.

In 2000, the then government introduced research and development (R&D) tax credits to support companies who take risks using technology to develop new processes or products. The scheme was reviewed and supported by Sir James Dyson for the 2010 coalition and was enhanced further in 2017. It is a very good level of support, but it seems that companies in the Liverpool City Region may not be applying for the support they could receive from HMRC.

The first issue may lie in the name. The scheme is not all about scientists in white coats; software development accounts for the largest proportion of payments and successful claims have come from most sectors of industry, including food & drink, wholesale and retail, and admin support businesses.

Also, companies don’t need to be paying corporation tax to benefit. Typically, 40-50% of the annual support comes to companies by reductions in their tax bills, but the balance is paid in cash to those companies who don’t have tax liabilities. One company pointed out that its £54k cash payment made as much difference to its profit line as generating £1M in sales. The process for calculating what can be claimed is not straightforward, but expertise is available that will more than pay for itself in ensuring companies get the payments they could be due.

HMRC publish data by regions, but more detailed is required to be useful. I made a Freedom of information request to HMRC to get local data on the levels of claims being made across the North West. The results in the table below are startling

Table showing proportion of SME’s claiming R&D Tax Credits and Values.

 

 

Number of SMEs (000s)*

Number of Claims**

Value of Claims (£M)**

% of SME's claiming

Average Claim value (£K)

UK

 

2315142

21695

1330

0.94

61.3

London

 

503660

3995

325

0.79

81.3

North West

 

259055

2290

90

0.88

39.3

Greater Manchester

 

91005

1045

50

1.15

47.8

Liverpool City Region

 

37890

310

10

0.82

32.3

             

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