One of the most interesting stories has been Northern Ireland, a region that is experiencing real boom thanks to a huge variety of businesses that are investing in the future.
We seek to explore why Northern Ireland is proving such a success story for research and development, and explain how R&D Tax Credit can help businesses from Northern Ireland to capitalise on this opportunity to drive further investment and ensure they remain at the forefront of innovation.
The economic backdrop
Historically, journalists and analysts consider the economy in Northern Ireland to be lagging behind the rest of the United Kingdom in areas such as inward investment. The raw economic data seems to support this suggestion, but it’s important to understand where these numbers come from. Among the key factors considered for Northern Ireland is falling employment in the public sector, weak growth in finance, and comparatively poor performance in the domestic housing market. Public sector employment is expected to continue to fluctuate with the political seasons and although it has an economic impact it is not necessarily a particularly solid economic indicator. Meanwhile, strong performance from the finance and housing sectors are traditionally seen as indicators of economic growth, rather than being responsible for driving expansion in the economy.
A significant portion of the economic engine of Northern Ireland – in stark contrast with the somewhat underwhelming figures – is revving up very nicely. Advanced manufacturing, pharmaceuticals and food processing are some of the most significant sectors of the economy, and they are all clearly expanding areas for research and development.
That is not to say that the economy faces no challenges. The public sector has always been a disproportionately significant employer in Northern Ireland, and current downward trends are impacting on employment rates overall. Furthermore, corporation tax in the region is not seen as being competitive with the famously low tax rates within neighbour the Republic of Ireland, and some worry that this disparity could limit interest from international businesses.
However, Northern Ireland is an exciting place to be. Overall operating costs are low compared with the UK, universities are internationally competitive, and the economy is driven by a strong core that looks set to innovate rather than resting on its laurels.
Increasing R&D in Northern Ireland
Some of the surge in research and development in Northern Ireland, then, comes from the unique and effective make-up of its industries. Advanced manufacturing, pharmaceuticals, and food industries are all sectors likely to be investing heavily in R&D projects that can be supported by significant R&D tax relief claims.
This means that Northern Ireland is seeing significant growth in R&D expenditure by local businesses on the rise.
The latest OECD figures on R&D activity speak for themselves. A 20% increase in total R&D tax claims in 2013-2014 has been accompanied by a 25% increase in total claim value, highlighting both an increase in companies innovating in Northern Ireland, as well as increases in the value of R&D claims submitted by qualifying companies.
The best possible environment for R&D tax relief claims
This year we have seen the most welcoming environment for R&D tax relief claims there has ever been. SME R&D tax relief claims can now refund up to 33.35% of the qualifying R&D expenditure, total R&D claim amounts are surging towards almost £2 billion per year (£1.75 billion was claimed 2013-2014, up a staggering £380 million from £1.3 billion the previous year), and the UK in general is punching well above its weight in terms of research and development activity.
We’ve delved into the nitty-gritty of R&D tax statistics in the past, The figures make for interesting reading, but one key takeaway is that the UK has fantastic strength in depth. Traditional centres for business like London and the South East are being supported and potentially challenged for their positions by rapidly rising, energetic new economic powers such as Northern Ireland, Scotland and the East of England.
One thing that could slow this potential for growth is the failure to take advantage of the full range of tax incentives available. If you’d like to make sure you’re accessing the full range of tax incentives designed to encourage innovation then contact ForrestBrown for a no obligation consultation.