HALF OF ELIGIBLE LONDON FIRMS FAILING TO CLAIM R&D TAX RELIEF

More than 8 in 10 companies in London could be eligible for Research and Development (R&D) tax relief on new products and services but less than half of firms have ever claimed, tax relief specialists Catax revealed today.

Businesses in London are missing out on millions of pounds even though 82% of them have developed new products or business processes in the last two years, spending an average of £232,263 on these innovations, research shows¹.

This means these companies are in line for valuable R&D tax relief that the government provides to encourage innovation.

But only 42% of all the London firms report ever having claimed which means at least 49% of eligible firms are missing out on the tax credits they deserve, the Catax study shows.

This is either because they don’t think they qualify or they incorrectly believe that it is expensive and time consuming and ‘would not know where to start’.

A worrying 21% of businesses in London do not realise they can claim R&D tax relief if they develop a new product or service, according to the Censuswide survey.

London executives believed the average value of an R&D tax relief claim in the first year to be just £23,227 when the true figure is more than double that, at £49,000 for firms in all sectors nationwide. R&D doesn’t even have to have been successful to qualify and claims can be backdated at least two years².

Across the UK, the number of firms that have ever claimed is 37%, which puts London ahead of the national average despite the huge proportion of companies missing out.

Mark Tighe, CEO of Catax, commented: “London’s business sector is missing out on millions of pounds in R&D tax relief each year – money that could be reinvested into businesses to encourage further innovation and growth.

“Many companies still think that R&D is all about science laboratories and test tubes and simply do not relate it to their own work. This needs to change.

“Companies in London invest hundreds of thousands each year on developing new products and services which would make them eligible for tax relief and yet less than half are actually claiming.

“Business executives looking to improve margins and efficiencies must take a proper look at their R&D tax relief entitlements. Most good R&D tax relief specialists will work on a commission basis so concerns over costs should be dismissed.

“New products and services do not even have to have been successful to qualify for R&D tax relief because it is all about encouraging innovation.

“If all the companies in London started claiming what they are entitled to it could really supercharge the city’s economy.”

R&D tax credits can help to reduce a limited company’s corporation tax bill or be claimed as a cash sum reimbursement from the HMRC. R&D tax relief only applies to those businesses that are liable for corporation tax, including businesses making a loss.