South East: New data shows 17% increase in R&D claims

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

In total, businesses across the South East submitted 6,290 R&D claims in 2017-2018, claiming some £655 million in tax relief, with average claims in excess of £100k. Compared to the data reported for the previous year published in February 2018, this represents a 17% rise in the number of claims and a 22% rise in the amounts claimed in R&D tax credits.*

While there was a familiar trend nationally in that manufacturing, information and communication, and professional scientific and technical sectors remained the largest beneficiaries, in the South East, construction claims increased by 31%, and manufacturing also saw healthy growth.

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, James Tetley, Southampton-based partner and national head of R&D at RSM, said: “It is encouraging to see consistent trends each year, with overall claims increasing (in number and value), and the South East remains the second largest claimant region, accounting for 19% of total value claimed. This is a direct benefit on sectors that for years, have failed to capitalise on the opportunity to reduce their net cost of investment, with construction being a perfect example having grown 31%.

“It is also interesting to see the education sector growing – the current Covid-19 pandemic will no doubt accelerate this even further when we see this year’s statistics released, given the investment going into online/ digital teaching resources.

“Managing cashflow effectively has never been more important to companies given the impact of Covid-19 on the entire global economy, 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.”