Why is Northern Ireland lagging behind when it comes to R&D tax credits?
Article as printed in the Irish News 31.01.18
When it comes to business owners and financial directors taking R&D tax credits seriously, there is still a lot of work to do to ensure that they understand exactly what it could mean for their business.
R&D tax credits are the most generous yet underclaimed corporation tax relief available in the UK. The incentive enables a business to recoup substantial development costs as cash or credit for every year they have qualifying R&D activities.
However, statistics recently published by HMRC revealed thousands of businesses are not claiming their full entitlement under this valuable scheme. The alarming figures show the scheme is hugely underclaimed in the UK, particularly in Northern Ireland which accounted for only 3 per cent of total claims and 1.6 per cent of the total tax benefits claimed.
Tom Verner, Managing Director of Northern Ireland’s leading R&D tax credit company, the Momentum Group, gives his industry insight into why Northern Ireland companies’ claims are lower than the rest of the UK and how companies can use this incentive to retrieve every penny they are legitimately entitled to.
As a specialist R&D tax credit advisory firm our experience tells us that the answer to this is simple; Northern Ireland business owners and leaders need to gain a thorough understanding of what qualifies for this specialist relief and what does not!
We know that Northern Ireland is leading the way in innovation across many industries such as engineering, technology, design, manufacturing and construction to name but a few. A fair assumption would be to think that many businesses operating in these sectors are amongst the 785 that claimed R&D tax relief in 2016.
However, this is not the case. Despite Northern Ireland punching well above its weight in innovation, it falls behind nearly every other region of the UK, with the only exception being the Channel Islands, in claiming back its full entitlement.
The main reason for this is a lack of understanding of R&D tax credits and the complex legislation. Many local business owners are aware of the scheme, yet most believe R&D tax relief is limited to white coat industries. This is not the case; it is available to businesses operating in all sectors. For example, we recently prepared a successful claim for a local software company securing more than £120,000 in R&D tax relief who didn’t realise they were entitled to any form of relief.
Compounding this lack of awareness is a severe lack of understanding as to who is best placed to prepare R&D claims. Many companies believe their accountants should review claims because it involves tax. They are simply delighted when they are told they can claim back any amount of relief for innovation and do not think to question to what extent they qualify.
What they don’t realise is that without R&D specialist advice they are only claiming a fraction of what they are entitled to. For example, we recently undertook a review of a Lurgan based company that had been advised by their accountant that they did not undertake any R&D. Our technical analysists and specialist advisors quickly realised that they were very innovative and were attempting to develop an advance in their equipment that would enable them to out-perform European competitors. This resulted in £81,289 in cash which has now been reinvested back into the project and a strategy for growth.
We also often receive calls from potential clients who have made previous claims themselves. As much as this is good that they are claiming, it will almost certainly not be the full amount as mentioned previously, most companies do not know what does and what does not qualify. And getting it wrong can have serious HMRC consequences!
The best way to avoid this is to speak with a specialist R&D advisory firm and ensure that you claim for absolutely everything you are entitled to. Even the more experienced accountancy firms quite often seek the advice of expert R&D firms. After all, you can’t be all things to all men!
Don’t take my word for it. Speak to a specialist firm today to find out if you qualify or have them undertake a review of a previous claim. Most advisory firms offer a free consultation that will give you peace of mind without any obligation on your part. Nothing ventured, nothing gained. You could literally be missing out thousands of pounds that you are rightly entitled to.
At Momentum, we are working hard to change this tide as we are very proud of the innovation coming out of Northern Ireland. We prepare claims for some of the most progressive, local companies so we understand the level of products and services offered here. To date, we have secured circa £100m in R&D tax credits in virtually every business sector both locally and throughout the UK.
My advice to companies and their accountants is to contact a specialist R&D tax credit advisory firm who has an experienced team of technical and legislative experts ready to assess your business activities and provide a comprehensive, technical report to support your claim.
We are calling on all Northern Ireland businesses to take action this year to explore this valuable incentive and make Northern Ireland as competitive as the other UK regions covered in the HMRC statistics.
To find out more about R&D Tax Credits contact Momentum on 028 9140 4030 or send an email to firstname.lastname@example.org