UK firms missing out on R&D tax relief

By staff reporter

- Last updated on GMT

Related tags Industry Manufacturing

UK manufacturers are missing out on tens of millions of pounds of
research & development (R&D) tax relief because they are
not investigating whether their activities qualify for the benefit.

New research from Deloitte & Touche suggests that companies are still unaware of how wide the definition of R&D is, or do not involve their technical employees in the claim preparation process. This is despite the fact that the definition of R&D for the purposes of tax relief has become more clearly defined in recent years. "The UK Government has recognised the importance of investment in R&D and has introduced significant incentives to encourage UK manufacturers to invest in new and innovative products as they face growing competition from emerging markets,"​ said Jane Lodge, UK manufacturing industry leader at Deloitte. "Yet many companies are mistaken that they do not undertake eligible R&D and therefore do not make claims. With rising costs in energy and raw materials, it is all the more important that manufacturers receive this cash injection." ​ A survey of 560 Small and Medium Enterprises conducted last year found that 55 per cent of businesses eligible to claim R&D tax relief were not doing so. Despite being an 'R&D heavy' industry, of the 160 manufacturers surveyed, 71 per cent of eligible businesses were not claiming the relief. A third of these manufacturers did not think they carried out R&D whilst 20 per cent were not aware of the R&D tax relief. This should concern the food industry, which is increasingly devoting resources to R&D in order to better tap growing consumer health trends, and to identify new opportunities. The figures are more alarming when analysed by region. Almost three quarters of manufacturers in the South-West are failing to claim R&D whilst all manufacturers surveyed in the Midlands eligible to claim R&D tax relief are failing to do so. In the South-East, 63 per cent of manufacturers are not claiming R&D tax relief whilst the best performing region is the North-East with 50 per cent of eligible manufacturers making claims. Part of the problem for manufacturers comes in identifying eligible activities and appreciating the fact that activities can still qualify even if the company is being paid to perform the work. "In a normal manufacturing cycle, up to 80 per cent of the total intellectual property in a product is contained in the know-how surrounding the manufacturing process,"​ said David Cobb, Deloitte's R&D service line partner. "It is likely that activities eligible for R&D tax relief are being carried out but this is the sort of activity that is rarely considered by manufacturing companies. Time is now running out for many of these companies as the deadline for claiming the relief for a number of years expires on 31 March 2008 due to a change in the rules last year."

Related topics R&D