Research and Development Tax Relief

Nigel Whittle Accountant EssexPosted by Nigel Whittle:

Recently, there seems to have been a rapid growth in companies selling their services to obtain Research & Development Tax Relief for almost any type of business.  This growth in claims is supported by an HM Revenue & Customs Report released this month providing the latest statistics.

The Government clearly wishes to encourage greater R & D spending which should in turn lead to greater investment in innovation.  The R & D Tax Relief is a relief which would either reduce a company’s liability to corporation tax or if no tax is payable by making a payment to the company itself, a Tax Credit. 

R & D Tax Relief was introduced for SME’s in 2000 and the cost to the Exchequer of providing this support has escalated rapidly.  In the last year where we have statistics for 2015/16, the cost rose by 20% from the previous year and now totals £2.9bn.  In total since the R & D Tax Relief Scheme was launched over 170,000 claims have been made and £16.5b in tax relief claimed.  The cost of the support rose substantially from 2012/13 when the relief itself was increased causing a significant rise in the number of claims.

With the ever increasing marketing for R & D claims being aggressively pursued by a number of Research & Development Tax Relief consultancies and the rapidly increasing cost to the Government, it will only be a matter of time that this area of public spending will undergo investigation to ensure the money is well spent.  The objectives to promote research and development is laudable but there is no ‘money tree’ as we are often told and whereas genuine research & development which will benefit the country as a whole should be promoted, the more marginal cases may soon be considered a cost unworthy of continued taxpayers support.

Nevertheless, where research & development is undertaken which is innovative, advances our knowledge in science or technology and overcomes  scientific or technological uncertainties, this is worthy of additional support and the Research & Development Tax Credits which are available are very valuable to eligible companies and we strongly recommend such a claim is made.

For further information, contact either Mike Carabine, or Nigel Whittle or your local Lambert Chapman LLP partner.

September 2017


The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.

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