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New figures reveal R&D hotspots in the North East

ByEmily

Mar 3, 2018

New data published for the first time by HMRC has revealed the hotspots for R&D tax relief claims across the North East.

Tyne and Wear-based businesses topped the league for the number of claims for R&D tax credits in 2015-16 at 485 claims, followed by County Durham on 150 and Northumberland on 140.

In total, businesses across the North East submitted 930 claims for tax relief for R&D expenses in 2015-16, claiming some £65m, a 21 per cent rise and 44 per cent on the previous year in terms of the number and value of claims, respectively.

R&D tax credits are a tax relief designed to encourage greater R&D spending, leading in turn to greater investment in innovation. They work by either reducing a company’s liability to corporation tax or providing a cash injection for companies without a tax liability (i.e. loss-making businesses).

The statistics, which for the first time provide a detailed analysis of R&D claimants by region and sector, are skewed in that the geographical analysis is based on companies’ registered offices. As a result, London tops the leaderboard for the number of claims. It is also little surprise that over 40 per cent of claims in the capital are in the software and technology sector.

The North East region was tenth in the rankings regarding number of claims and accounted for 4 per cent of claims nationally, and two per cent of total tax credits.  Unsurprisingly, manufacturing dominated the claims made at 32 per cent of total claims, followed by professional, scientific and technical, and information and communication.

Commenting on the new numbers, Richard Urron, tax partner at RSM in Newcastle said: ‘While it is positive that overall R&D claim numbers and values across the region continue to rise, it’s not clear whether this is down to a large number of new businesses claiming, or whether it is those businesses late to the party in terms of making claims – we suspect it is the latter.

‘We believe that the disparities that we see across the UK and across different sectors is due in large part to ongoing lack of awareness of how the relief can apply.

‘The truth is that many more companies across the North East are undertaking research and development work but they are not recognising that these activities could be eligible for tax relief, despite the high levels of HMRC engagement and support through the HMRC R&D Consultative Committee and other measures. This means some businesses could be missing out on a cash boost.

‘The largest proportion of claims in the North East were in the manufacturing sector – not surprising given that the region continues to contribute a great deal to the Manufacturing and Engineering Sector in the UK. However, it is interesting to note that only 45 claims were submitted in the construction sector which suggests that construction and civil engineering businesses lag behind when it comes to awareness that R&D tax relief could apply.’

By Emily