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R&D Tax Claims on the rise once again

According to the latest HMRC data, UK businesses spent £47 billion on research and development (R&D) in 2019-20 and claimed an incredible £7.4 billion in tax relief as a result. 

This record amount of R&D tax relief was up more than £1 billion on the previous year’s claims, with manufacturing and IT claiming the most support from the various tax credit schemes. 

The 19 per cent rise in the value of claims was thanks to more than 89,000 businesses making use of R&D tax relief in 2019-20. 

Of the amounts claimed, SMEs accounted for £4.4 billion, up from £3.5 billion the year before, while larger businesses using the R&D expenditure credit (RDEC) scheme claimed around £3 billion. 

The average claim for an SME during this period was £57,330, an increase of seven per cent on the previous year. Meanwhile, average claims for the RDEC scheme only rose by 0.5 per cent during the same period to £317,829.

The R&D tax credit scheme incentivises businesses to undertake R&D into products, services or processes that lead to a unique advance in science and technology by allowing them to offset their investment against their Corporation Tax bill. 

Users of the SME scheme can deduct an extra 130 per cent of qualifying costs from yearly profits, as well as their normal 100 per cent deduction. Even if the company is loss-making, the business can claim a cash tax credit worth up to 14.5 per cent of the surrenderable loss.

If you have questions regarding the rules surrounding R&D tax reliefs, please contact your Seymour Taylor representative today or for new enquiries contact Liza Rowles our specialist Business Tax Director at enquiries@stca.co.uk or call 01494552100.

This blog is for guidance only, professional advice should be obtained before acting on any information contained herein. The information was correct at the time of publishing on 20 January 2022.