West Midlands companies losing out on tax savings – claim

Taxation specialist warns region’s businesses are failing to take advantage of scheme.

Companies across the West Midlands are still losing out on millions of pounds in research and development tax relief savings every year compared to their counterparts across the rest of the UK, according to a Birmingham-based R&D tax relief specialist.

Despite an increase of 19% year on year in the total R&D tax credits claimed in 2015-2016, analysis of the latest HMRC figures for the FYE 2016 shows that West Midlands businesses accounted for just 8% of total claims and total tax benefits claimed.

Wendy Smith, Business Development Manager for Jumpstart in the West Midlands, commented: “These latest HMRC figures are an alarming demonstration of just how much companies in the region are losing out in terms of tax savings compared to companies throughout the rest of the UK. Of the 26,255 claims across the UK totalling £2.9billion in tax benefits, only 2,165 claims came from companies in the West Midlands and resulted in just £230million back.”

Of the 2,165 West Midland claims, 1,845 were claimed under the SME R&D scheme and the remainder were claimed under schemes for large companies.

London and the South West made the highest number of claims in the year. London companies accounted for 19% of all claims and 29% of the total tax relief claimed, and the South West accounted for 17% of claims and 20% of the total claimed.

Jumpstart has previously said if the West Midlands region was as effective at claiming its R&D tax relief as its counterparts in London and the South East, “it could be between £47 million and £64 million per year better off.”

The figures show a concentration of claims in the Manufacturing (28% of claims and 32% of total claimed); Professional, Scientific & Technical (20% of claims and 23% of total claimed); and Information & Communication (26% of claims and 20% of total claimed) sectors across the UK.

Ms Smith continued: “Whilst uptake of the UK government’s R&D tax relief scheme is increasing across the UK as a whole and is very healthy in certain regions, companies in the West Midlands are clearly not reaping the full benefits of the scheme.

“Also, local companies could be under claiming or over claiming because their technical project activities and expenditures are not being accurately interpreted against government legislation. As well as the introduction of increased scrutiny over such claims by HMRC, the process of claiming is very much a technical assessment, so it is important that companies instruct a specialist advisor to handle this for them.

“There is huge scope for a much more focused uptake by companies in the West Midlands. I would urge firms here to get in touch with Jumpstart or their advisors to find out more about how they can make significant tax savings through R&D tax credits if they are making a profit or get a cash credit if they are loss making.”

Since its inception, Jumpstart has helped its clients recover over £95 million in R&D tax relief and has identified over £482 million in eligible R&D expenditure.

It recently opened a Birmingham office in Newhall Street with a special focus on supporting creative, digital, engineering and manufacturing firms.