New statistics from HMRC have revealed there has been a 10% year-on-year rise in the number of claims for research and development tax credits submitted by manufacturing firms in 2014-15.
The latest data shows that manufacturing companies submitted almost 6,345 claims for R&D tax relief in 2014-15, up from 5,815 in 2013-14.
The total amounts claimed in the period rose from £635m to £770m, a rise of more than 20%.
First introduced in 2000, R&D tax credits are designed as a tax relief to encourage greater research and development spending and innovation.
They credits work by reducing a company’s tax bill by an additional amount depending on the company’s allowable R&D expenditure. Since launch, more than 140,000 claims have been made to date, with almost £14bn claimed in tax relief.
Over time the rate of relief has become more generous and is now worth up to 230% for SMEs. This means that for each £100 of qualifying costs, the corporation tax paid by SMEs on income could be reduced by an additional £23.
Nick Greenwood, national lead for manufacturing at audit, tax and consulting firm RSM, commented: “While it’s great to see a 20% increase in the amounts being claimed by manufacturing businesses, our experience on the ground is that we still see a large number of firms not taking advantage of this tax relief programme.
“Often this is because businesses have investigated opportunities in the past and decided they weren’t eligible. However, changes in eligibility criteria and changes in business operations may now mean they can qualify.
Greenwood added: “Manufacturing companies should regularly review their activities and examine their eligibility. This can be by challenging pre-conceptions that the business is not ‘doing’ R&D, or that the value of the R&D expenditure is too low to warrant a claim.
“For example, companies in the engineering sector can ask themselves questions as to whether there are specialist engineers consulting on a project or whether contracts contain extensive indemnity and retention clauses.
“These typically indicate technological uncertainty – one of the key criteria for a successful claim.”