When Is Your FOMO Going To Make You Look Into A Claim For R&D Tax Credits?

It’s not often I am ahead of my time, but I wrote a blog about the Fear Of Missing Out on an R&D Tax Relief claim in December 2016 and published it in the New Year. I knew I was ahead of my time when my Social Media partner asked me what FOMO was!

Normally FOMO is the fear of missing out on something happening when your friends go out but it can be applied across a number of other areas, I am just repurposing it for the sake of R&D Tax Credits!
Well, if it hasn’t done before, your FOMO should be twitching about now if you operate in the Food and Drink industry. HMRC and the Office of National Statistics have recently published the statistics for R&D Tax Relief claims processed for the 2016/17 tax year and finalized the figures for the 2015/16 tax year, which finally was closed to amended returns on 31 March 2018.

They make for some very interesting reading. Headline figures for all the claims submitted in relation to the March 2016 tax year show that a total of 43,040 claims for R&D Tax Relief were submitted, of these 36,820 (over 85%) were submitted by SME businesses. The total value of all claims during the year was a staggering £3.7bn of tax relief.

If you think those figures are significant, the initial figures for 2016/17 are even more staggering, so far HMRC have processed 39,960 claims of which 34,060 are from SME businesses, but there were still another 9 months for claims to be submitted. This time last year the number of claims processed for the 2015/16 tax year stood at only 26,255 claims, so nearly 40% of all claims were processed after the statistics were published. If the same trend were to follow that would mean that in 2016/17 there would be over 66,000 claims an increase of over 50% on 2016/17.

Now here’s why your FOMO should be twitching, the table below represents the total claims across all industries. You’ll probably note with interest like I did that the ‘Accommodation and Food’ industry is languishing way behind the majority of other industries, now it may be that some ‘Food Manufacturing has ended up in ‘Manufacturing’ but it does represent a worrying statistic that the industry is probably missing a trick when it comes to claiming for their innovation.

Finally, the 2018 Budget announced on Monday 29th October included one small change to the R&D Tax Relief landscape, which whilst only small, may have a significant impact on smaller businesses paying notional salary and dividends to a director performing R&D or on overseas business ‘starting-up’ and seeking investment in the UK through a UK Limited
company but offshoring their R&D to an existing entity. The change has applied a cap on the amount of payable tax credit in the event of the company making a loss in the year, where that cap is three times the total PAYE and NI Payments the company has made. Whilst the measure is designed to reduce the tax loss overseas in the latter scenario, it may well have a negative impact on the former, but if they have a history of paying dividends, they will have a history of making profits and therefore paying tax, so may not necessarily end up in a loss position. How this change may affect the governments desire to make the UK the best place for tech businesses to “start-up” we’ll have to wait and see!

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