Figures show the majority of UK transport firms could claim for R&D tax credits, but aren’t.
Transport firms are the lifeblood of the UK, consistently keeping the country running smoothly throughout the year. Without their hard work and long hauls every day, UK business would simply collapse.
Transport firms also need as much help financially as they can get in this current climate. Figures show that the transport industry is one of the most at risk in the wake of no deal Brexit, and in the face of an unsure future, firms need to be as vigilant as possible.
That is why the news that 56% of transport firms do not know about the government incentive, R&D tax credits, is particularly startling. These firms are potentially throwing away millions of pounds every year, due to investing in new products and business processes that could be covered by the tax relief.
How many transport firms are missing out on R&D tax relief?
Figures show that only 46% of UK transport firms have heard about R&D tax relief, with just a quarter (25%) claiming it. The firms who are aware of the incentive but aren’t claiming are doing so because they either do not believe they qualify, or they mistakenly believe that it could cost them money to claim.
This is in line with UK averages across other industries. Incredibly, the average percentage of eligible firms that have ever claimed R&D tax credits is 37%.
Official Government statistics do show an upward trend in claim value, however. The HMRC R&D tax credit statistics 2018 report showed that there was impressive growth in claim value in Transport & Storage, which saw a 42% increase. This indicates both an increase investment in R&D in transport, but also that those who are aware of the relief and are understanding the claims process a little more.
Samantha Holloway, CEO of rdtaxcredit.org.uk, commented:
The figures show that not enough is being done to educate UK transport firms about the tax relief they are entitled to.
So many companies we come across believe research and development is about lab coats and space rockets. It is much broader than that, and many transport firms who are eligible are missing out.
What are R&D Tax credits?
R&D tax credits can help to reduce a limited company’s corporation tax bill or be claimed as a cash sum reimbursement from the HMRC.
The UK Government is aware that Britain is world-renowned for being a force in innovation and research. However, innovation is not cheap, so back in 2000 they introduced R&D tax credits.
These tax credits were put in place to encourage innovation in UK companies, in order to ensure they can compete with the biggest global superpowers. The Research and Development that takes place does not actually even need to be successful to qualify, and claims can be backdated by at least two years.
It is a hot topic in government too. Chancellor Phillip Hammond announced in the most recent budget the government’s pledge to raise the total R&D investment to 2.4% of GDP by 2027. The Budget report also touted an extra £1.6bn for its modern industrial strategy. In the past the government has also made administrative changes to the R&D expenditure credit in order to increase the certainty and simplicity around claims. Put simply, the government want you to claim this tax relief.
How much are transport firms missing out on?
Since the tax relief was introduced in 2000, an incredible £21.4bn has been claimed by UK businesses. On average, an SME’s claim is equal to almost £54,000 – an amount which no transport executive would turn their nose up at.
The recent figures show that the transport executives who are claiming could be underclaiming by more than double the amount they are owed – on average an underclaiming of £24,955.
Executives believed the average claim value for R&D tax relief to be just £21,045, when the true figure for firms in transport is £46,000.
This is incredible, when thinking about the fact that those transport firms in question have undertaken an average of £333,738 worth of research and development over the past two years.
Relief can be as much as 230% of qualifying R&D costs if you are a small or medium sized enterprise. You can claim R&D tax credits on day-to-day costs and qualifying expenditure, including costs for staff, subcontractors, materials, software and utilities.
If you do fall into the category of SME, you can deduct a 130% of qualifying costs from annual profits, in addition to the normal 100% deduction – making the deduction 230%. If the company is loss making, you can claim a tax credit worth up to 14.5% of the surrenderable loss.
Is my transport company eligible for R&D Tax Credits?
Firstly, this particular tax relief is in relation to SMEs. Is your company an SME?
Definition of an “SME”:
- Less than 500 Staff
- Annual turnover not exceeding £100m or an annual balance sheet figure not exceeding £86m
Next, your company needs to be taking part in “Qualifying Activity”. This includes:
- Creating new products, processes or services.
- Changing or modifying an existing product, process or service.
- Activities aimed at obtaining new knowledge.
- The search for alternatives for materials, devices, products, processes, systems or services.
If your business is undertaking R&D activity in relation to a specific project (even if the project is unsuccessful in the end) and the R&D activity meets the above definition of qualifying R&D, then you could be eligible for this additional tax relief.
Many companies carry out eligible R&D activities without realising that their work qualifies for this little known tax relief.
How can RDTaxCredit.org.uk help?
RDTaxCredit.org.uk help companies across all sectors with claiming R&D relief, leaving them with more cash to re-invest into their business. We have of experience in dealing with many transport companies.
Our Team of Chartered Tax Advisers ensure you have a robust claim that identifies qualifying R&D and the associated costs.
We can assist in preparation of the R&D claims and submission of the claim to HM Revenue & Customs.
We handle the R&D Claim from start to finish & we produce the technical report on your behalf that helps R&D Tax inspectors understand your work and approve the claim
At rdtaxcredit.org.uk, we understand that beginning to think about claiming R&D Tax Credits may be a little daunting. We want to help you through the process, to ensure you receive the financial reward that the Government wants to give you.
We offer a friendly and professional approach to R&D Tax Credits which includes:
- A free no obligation initial review.
- 100% success rate
- 30 day quick turnaround
If you would like to contact one of our experts for free initial advice, complete the quick enquiry form to receive a no-obligation review of your R & D Tax Relief claim.