Research and development in the Solent area – the area around Portsmouth, Southampton and the Isle of Wight – is booming and has been for a number of years. Recorded research expenditure, however, lags behind the national average, despite the number of patent applications submitted across the region being well above that average.

This suggests to us that R&D tax credits in the Solent region are being unclaimed. We’re going to take a deeper look at the naval research and development that’s done in the Solent area, the government schemes to help support this valuable cluster, and some potential areas of confusion that could be discouraging or reducing legitimate R&D tax relief claims.

Naval R&D In Solent

The maritime sector, according to figures from the Solent LEP, accounts for 20.5% of Solent’s “Gross Value Added”. This is a massive industry, and a highly creative and innovative one. The areas in which the Solent maritime industry is most active (from employment figures) are also exactly the sorts of areas that seek to resolve scientific and technological uncertainty. There’s a special emphasis on computing, electronics, optical products and electrical equipment. These areas include great low-hanging opportunities for research and development tax relief, but also tend to spawn additional opportunities for R&D tax credit claims in expenditure surrounding and supporting the core projects. During the recession affecting the rest of England (in which manufacturing contracted by 1.2%), the local manufacturing sector grew by an enormous 8% creating 4,600 jobs. Since staffing costs are a huge contributor to many research and development tax claims, we think that’s a key indicator that there are significant opportunities around R&D tax relief to be had.

Marine Research And Education Institutes

There are a number of enormously important facilities and organisations in the area encouraging and enabling the great work being done. Some of the most important are:

Southampton Marine and Maritime Institute (SMMI)

The Southampton Marine and Maritime Institute, (The SMMI)  is a collaboration between the University of Southampton and Lloyd’s Register. Its specialities include naval architecture and deep sea mining, and it’s extremely important to the region. It brings together research and innovation from a variety of sources, including expertise from industry, government, research and academic backgrounds.

Warsash Maritime Academy

Warsash Maritime Academy is a very well-respected maritime training college, and is a part of Southampton Solent University. As well as training, the academy offers consultancy and research services. The academy is a key contributor to Solent’s naval competence, and has been responsible for the education of high calibre naval officers for a long time.

Portsmouth Institute Of Marine Sciences

The University of Portsmouth’s Institute of Marine Sciences is internationally known for high quality marine research. It has recently developed a £2 million aquarium and laboratory suite that adds to already extensive research facilities including its own research vessel and a floating research platform in Langstone Harbour. The Institute of Marine Services has specialist expertise in marine biology and marine and coastal management.

The Solent is one of the UK’s key regions for Naval Research – So why might qualifying companies be choosing not to claim?

Solent has a high level of government support and funding for naval research and development already, as it is a very important area.  The Solent 250 tracks the 250 largest firms in the region, who together account for almost 83,500 people employed, with a combined turnover of £11.1 billion.

The region has been explicitly singled out as one with an unexpectedly low level of R&D claims, and considering the innovative nature of many of the businesses operating in the region this would suggest that many potential beneficiaries are missing out. Many businesses across the region are the recipient of various forms of grant funding, and paradoxically this could lead to a lower level of R&D claims.

This is because many companies with eligible research and development projects believe, often incorrectly, that receiving any form of research grants in the form of state aid disqualifies them from making R&D tax claims. In reality, the situation is more complex.

Notified state aid will disqualify you from the SME scheme, but not the large company scheme.  State aid which is not ‘notified’ will not disqualify you from claiming R&D tax relief under any scheme, although you cannot claim for the expenditure related to the state aid which was received.

Another explanation for the apparent under-claiming could be that non-specialists are making many of the claims. While non-specialists can make claims, it often leads to oversights and missed opportunities – sometimes quite large. We talk more about the complexities of R&D tax claims in our post explaining why we don’t offer an R&D tax calculator, but if you really want to get into it just pick up the phone and we’ll be happy to have a chat about it!

The reason for the disparity could well be down to lack of awareness of HMRCs scheme, as well as the activities that can qualify for relief. With the average claim value for one of our first time R&D tax relief clients totalling over £46,000 it seems likely that businesses across the Solent region are losing out on tens of millions of pounds of support that’s available to them.

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