By Nigel Holmes, Head of R&D Technical Operations - Catax
On 30 September, HMRC published its annual Research & Development Tax Relief (R&D) and Patent Box tax relief (PB) statistics.
These took the usual format and, as in previous years, due to the two-year window to make claims, the most recent data is incomplete. Therefore, for comparison purposes, it is necessary to compare 17/18 data with 16/17 data.
Research & Development (R&D)
The number of claims increased to 62,095 in 17/18, an increase of 17% from 16/17. Of these, 54,005 of the claims were made under the SME scheme, this being a 19% increase. The amount of support provided by these claims amounted to £5.1bn, an increase of 15% from 16/17. So far, 59,265 claims have been made in 18/19, so it is highly likely the number of claims will increase again.
The data analyses claim by region but this is based upon Registered Office so isn’t a true reflection. That said, 45% of claims by volume and 60% by value are made by companies with a registered office of London, the South East and East of England.
The sector analysis uses Companies House SIC for analysis and the top three sectors are, unsurprisingly, “manufacturing”, “professional, scientific and technical” and “information and communication” which total 66% of claims by volume and 71% by value.
Interestingly, there have been 15,750 first time applicants, up 10% from 16/17. This must mean that over 10% of companies which claimed in 16/17 did not make a claim in 17/18.
72% of claimants have qualifying costs of £50,000 or less, which shows that the scheme is reaching many smaller and start-up entities. 23% of the claims are made by companies that are aged five years or less.
To see the full Research & Development report click here.
Patent Box (PB)
As with R&D, there has been a rise in the number of claimants, albeit small. 1,305 companies claimed PB in 17/18, obtaining tax savings of £1,101m. This is an increase in volume of approximately 12%, and 6% by value.
28% of the claimants were large yet they make up 92% by value. 715 of the claimants were in manufacturing (including pharmaceuticals) accounting for 30% of the relief.
To see the full Patent Box report click here.
Both of these reliefs are vastly underclaimed, either by not claiming at all or not maximising a claim. With PB, there will be many companies who have not sought to patent their creation or invention due to cost, but not being aware that by having a patent the company could nearly half it’s tax liability arising from patents from 19% to an effective 10% rate. With regards to Remediation of Contaminated Land (RoCL), official statistics from HMRC also show that only 1,600 claims were made in 17/18, highlighting a huge gap in the market left unremunerated.