The opportunity for R&D tax credits
At this time last year, we published research that found that whilst 80% of companies intended to innovate in the next three years, only 20% were intending to make an R&D tax credit claim. This discrepancy represents a big gap to overcome.
We already know that those claiming could collectively be contributing up to £6.8bn per year to the UK economy. If we can close this claim gap, the remainder could add a further £27bn in R&D investment.
To do so, we need to increase awareness of R&D tax credits. How do we do this?
HMRC’s R&D tax credits statistics 2017 show that companies have embraced RDEC since its introduction in 2013. Interestingly, it is SMEs who have proven beyond a doubt that they are not put off by a new scheme.
We believe the success of RDEC is the big story this year and a big opportunity for the future.
The benefits of RDEC
RDEC was designed to ensure that both profitable and loss-making companies could benefit from R&D incentives – and it’s popularity can be attributed in part to this.
RDEC is more independent of the company’s tax position, and the benefit a company is likely to receive is easier to forecast. In this way, it provides far greater stability compared to the previous large company scheme and the SME scheme. This makes it easier for companies to factor R&D relief into their investment decisions.
RDEC for all
Introducing the RDEC model for SMEs and large companies alike would reduce the overall complexity of R&D incentives. The government would still be able to target relief to SMEs. It could offer an SME RDEC rate to deliver a benefit comparable to the current SME R&D scheme.
We believe this change would similarly increase the number of claims made by SMEs for the same reasons as it has done large companies so far. Ultimately, RDEC for all offers a more attractive way of positively influencing investment decisions and in turn, would boost the overall level of R&D activity in the UK.