New data published for the first time by HMRC has revealed the hotspots for R&D tax relief claims across Yorkshire and the Humber.
In total, businesses across Yorkshire and the Humber submitted 1,750 claims for tax relief for R&D expenses in 2015-16, claiming some £100m, a 16 per cent rise and 43 per cent on the previous year in terms of the number and value of claims, respectively.
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).
The statistics, which for the first time provide a detailed analysis of R&D claimants by region and sector, are skewed in that the geographical analysis is based on companies’ registered offices. As a result, London tops the leaderboard for the number of claims. It is also little surprise that over 40 per cent of claims in the capital are in the software and technology sector.
The Yorkshire and the Humber region was seventh in the rankings regarding number of claims and accounted for 7 per cent of claims nationally, and four per cent of total tax credits. Unsurprisingly, manufacturing dominated the claims made at 36 per cent of total claims, followed by information and communication and professional, scientific and technical.
Richard Wilson, tax director at RSM, said: “While it is positive that overall R&D claim numbers and values across the region continue to rise, it’s not clear whether this is down to a large number of new businesses claiming, or whether it is those businesses late to the party in terms of making claims – we suspect it is the latter.
“We believe that the disparities that we see across the UK and across different sectors is due in large part to ongoing lack of awareness of how the relief can apply.
“The truth is that many more companies across Yorkshire and the Humber are undertaking research and development work but they are not recognising that these activities could be eligible for tax relief, despite the high levels of HMRC engagement and support through the HMRC R&D Consultative Committee and other measures. This means some regional businesses could be missing out on a cash boost.
“The largest proportion of claims in Yorkshire and the Humber were in the manufacturing sector – not surprising given that the region continues to contribute greatly to the manufacturing and engineering Sector in the UK.
“However, it is interesting to note that only 55 claims were submitted in the construction sector which suggests that construction and civil engineering businesses lag behind when it comes to awareness that R&D tax relief could apply.”