We know that businesses in Scotland have a proud tradition of innovation and invention but are Scottish businesses benefitting fully from HMRC’s innovation incentives? These schemes are designed to support businesses that seek to improve or overcome challenges or uncertainties in their products and processes.
Statistics from HMRC last year suggested that businesses in Scotland could be underrepresented. Now, more than ever, the financial benefit of claiming and, more importantly, optimising R&D tax credit and Patent Box relief could be critical.
Is Scotland making the most of R&D tax relief?
Regional analysis of number and value of SME R&D tax credit claims, 2019- 20, show that SMEs registered in Scotland made 3,805 claims with a combined value of £195 million. This means that the average claim for SMEs in Scotland is £ 51,248. Clearly, this is a significant amount of money and a welcome boost to business in Scotland.
However, R&D claims are certainly concentrated in companies with a registered office in London, the South East, or the East of England. These 3 regions make up 44% of all claims and 60% of the total amount claimed.
Which Scottish businesses claim the most R&D tax relief?
Unsurprisingly it’s Scotland’s major cities that are making the most claims. This may be more of an indicator of registered office rather than where the innovation is taking place. City of Edinburgh has 19% of Scottish SME claims, Glasgow City at 17%, and Aberdeen City at 9%. In total, those claims amounted to 56% of Scotland’s total SME claim value.
It’s a similar story for RDEC claims with 25% of Scottish claims being made by companies registered in Edinburgh.
The strong industry sectors both in Scotland and in the UK as a whole are Professional, Scientific & Technical, Manufacturing, and Information & Communication. 63% of Scottish SME claims come from companies in one of those three sectors, and 69% of the UK’s SME claim value.
Is Scotland making the most of Patent Box?
When it comes to Patent Box the number of companies claiming relief varies significantly across UK regions. It is projected that 60 Scottish companies will make a Patent Box for financial year 2019-2020 claim (4% of the UK total). The area with the most companies claiming was the South East (17%); although London-based companies claimed the largest amount of relief (50%).
Scotland-based companies claimed £27 million pounds which amounted to only 2% of the total Patent Box benefit for that year.
Find out if you could be doing more
Overall SMEs are receiving a tiny percentage of the value of the Patent Box scheme, and Scottish companies are receiving a tiny percentage of that.
GovGrant sees innovation as a continuum starting with R&D, which leads to IP creation and patents, finally culminating in a Patent Box claim. We work with Scottish companies to identify eligible activities for R&D tax relief, but also to uncover the commercial potential of IP through a Patent Box claim.
To find out more contact Colin.