Scots below average claimants

Tax advisers pounce to offer R&D relief to Scots firms

Taxing issue: more advice on offer


New data on tax relief for research and development has triggered a wave of interest from specialist tax advisers encouraging firms to take advantage of the cash benefits on offer.

The figures show R&D claims across the UK are increasing rapidly with a 52.2% rise in the number of claims year-on-year.

This includes a 50% year-on-year rise in the number of claims submitted by Scottish companies in 2016-17, with the level of support provided rising by 6%, according to data from HMRC.

A total of £2.5 billion was claimed as qualifying R&D in 2016-17, a 20% rise versus the previous year.

However, Jumpstart, the Edinburgh tax firm, said businesses in Scotland accounted for just 5% of the total value of claims made across the UK.

Martin Gartley, Jumpstart’s Scottish business development officer, said: “It’s disappointing to see that, despite a strong culture of innovation, Scotland has seen the lowest increase in both number and amount in SME claims for R&D tax relief in the period 2010 to 2017.

“While Scottish businesses started strongly in making claims in the earlier years of the scheme, other regions are catching up.”

This means that for each £100 of qualifying costs, the corporation tax paid by SMEs on income could be reduced by up to an additional £24.70 (applying 19% UK corporation tax rate for FY18).

Manchester-based tax specialist Catax is opening an office in Glasgow where it will add eight staff to four already working in its Edinburgh office.

It has produced research showing 73% of companies north of the border are classed as ‘innovative’ because they have developed a new product or process in the past few years, and so are likely to be eligible for R&D tax relief.

However, Catax says fewer than a third (31%) of potentially eligible firms report claiming it in the past well below the UK average of 45% of companies that report claiming R&D tax relief.

The rate of relief has become more generous in recent years, according to audit and tax firm RSM, and is now worth up to 230% for SMEs.

This means that for each £100 of qualifying costs, the corporation tax paid by SMEs on income could be reduced by up to an additional £24.70 (applying 19% UK corporation tax rate for FY18).

Ross Stupart, tax partner at RSM, said: “The continuing increase in both the quantum and number of claims being made is of course welcome news for businesses in the Scotland.

“However, it also brings into sharp focus the operational pressure that HMRC face in processing and risk assessing these claims, ensuring the right companies make claims, but also that these claims are processed in a timely manner.

“In the last 12 months, both through practical experience as agents, but also through discussions with the senior leads within HMRC, our experience is that there has been a significant backlog in claims being processed. In some cases, this is up to six months.

“This is a really disappointing position to be in. The R&D units have always been supportive, commercially minded and helpful and over the years have built a collaborative approach to working with R&D advisers to best support companies. Unfortunately, they are being let down by resource constraints that prevent them from engaging with businesses and the adviser community in a constructive way.

“We can only hope that these figures serve as a prompt to re-commit greater resource to operationally managing the R&D schemes, which are a crucial support to growing, innovative UK businesses.”

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