Nearlyeight in tenof companies in Leeds could be eligible for Research and Development (R&D) tax relief on new products and services but less than a third of firms have ever claimed, tax relief specialists Catax have revealed.
Businesses in Leeds are missing out on millions of pounds even though 78 per cent of them have developed new products or business processes in the last two years, spending an average of £316,599 on these innovations, research shows*.
This means these companies are in line for valuable R&D tax relief that the government provides to encourage innovation.
But only 30 per cent of all Leeds firms report ever having claimed which means at least 62 per cent of eligible firms are missing out on the tax credits they deserve, the Catax study shows.
This is either because they don’t think they qualify, they incorrectly believe that it is expensive and time consuming, they ‘would not know where to start’ or they are unaware it existed.
A worrying 22 per cent of businesses in Leeds do not realise they can claim R&D tax relief if they develop a new product or service, according to the Censuswide survey.
Leeds executives believed the average value of an R&D tax relief claim in the first year to be just £14,357 when the true figure is more than triple that, at £49,000 for firms in all sectors nationwide. R&D doesn’t even have to have been successful to qualify and claims can be backdated at least two years**.
Across the UK, the number of firms that have ever claimed is 37 per cent, which puts Leeds behind the national average.
Mark Tighe, CEO of Catax, said: “Leeds’s business sector is missing out on millions of pounds in R&D tax relief each year – money that could be reinvested into businesses to encourage further innovation and growth.
“Many companies still think that R&D is all about science laboratories and test tubes and simply do not relate it to their own work. This needs to change.
“Companies in Leeds invest hundreds of thousands each year on developing new products and services which would make them eligible for tax relief and yet less than a third are actually claiming.
“Business executives looking to improve margins and efficiencies must take a proper look at their R&D tax relief entitlements. Most good R&D tax relief specialists will work on a commission basis so concerns over costs should be dismissed.
“New products and services do not even have to have been successful to qualify for R&D tax relief because it is all about encouraging innovation.
“If all the companies in Leeds started claiming what they are entitled to it could really supercharge the city’s economy.”