Everyone involved in Research & Development Tax Credits will tell you it’s been a busy year for HMRC, with delays in the processing of claims over the summer hitting an unprecedented nearly four months between submission and repayment. Whether those delays have also led to the one-month delay in the publishing of the ONS’s annual review of the Research and Development Tax Relief scheme we’ll let you decide!
It’s fair to say though that HMRC broke the back of the problem in September and credit should be given to them for getting on top of things and getting back on schedule with their 28-day turnaround times.
What does the data say? You can get the full report at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/837282/Research_and_Development_Tax_Credits_Statistics_October_2019.pdf
SME Claims continue to grow
Well it confirms the fact that HMRC have been busy. There were over 45,000 claims under the SME Scheme for the 2016-17 tax year that’s an increase of nearly 22% and already there have been over 42,000 claims under the SME Scheme for the 2017-18 tax year, that’s with still 9 months to pass before the deadline for the submission of amended claims.
It also shows that over 12,000 business applied for the SME Scheme for the first time! That’s 12,000 companies like yours realising that they might be able to claim and getting in touch with someone to help them.
So does the amount they are claiming!
In 2016-17 the total support given to small businesses via the SME Scheme rose to over £2.2bn add to that a further £205m under RDEC and that’s over £2.4bn of tax savings. But if you look at the claims for this current year, they have already nearly hit £2.5bn so the big question is, will the SME Scheme top £3bn in tax savings in 2017/18?
The average claim under the SME Scheme grew to £49,173, but if you consider that there were 120 claims over £1m of which 35 were over £2m, perhaps the median claim value is the best source of comparison, that median claim value is around £19,000, even that is still a very nice amount of extra cash to have in your bank account! What do you think you would do with the extra money?
Why do some SMEs claim under the RDEC Scheme?
The RDEC scheme exists predominantly for Large Companies, those with more than 500 employees, so to qualify as an SME you can actually be quite big! Despite the size of their business, some SME’s have to claim under RDEC, that’s normally because they have received a grant to fund some elements of their project. This is often an area that is overlooked by businesses, because it is possible to claim both a grant and R&D Tax Relief.
The other area overlooked by businesses and this is particularly the case with software development companies is that if you are being subcontracted to by a large or international company to deliver a project for them, and the project is R&D for you, then you can claim under the RDEC scheme, as well as being paid by your customer. What is often even more overlooked is that if you bear the financial risk of that project, which generally means if you fail to deliver it on time or on budget, then you bear the additional costs, then you can actually claim under the SME Scheme for that project and get paid for it by your customer.
Are you part of the Statistics or part of the 75% still missing out?
A survey conducted over the summer, “The State of Small Business Britain” highlighted that 75% of eligible businesses in the UK are still missing out on R&D Tax Relief claims. That’s a massive number, but the anecdotal evidence for that is plain to see within the market, as our own marketing efforts keep turning up more business like yours who weren’t aware of their potential to claim for interesting projects that they have been performing that have an element of scientific or technological development to them.
If you want to be part of the 25% of the statistics next year instead of staying with the 75% still missing out all you have to do is give us a call or drop us an e-mail and we’ll have a no obligation 15-minute chat with you about your interesting project to see whether you can claim. That chat could be worth £19,000, and we reckon we need less than 2 days of your time to prepare the claim! Go on pick up the phone! Contact Simon on 01424 225345 or at
info@coodentaxconsulting.co.uk and reference BE52.