Dorset companies are lagging behind the rest of the UK when it comes to claiming research and development (R&D) tax credits, according to new analysis.

While businesses in the county invest more than £200m annually in innovation, a detailed study of HMRC statistics reveals that 21 per cent fewer companies are claiming under the scheme compared to the UK average.

Now NMT Tax and SG Financial – the two businesses carrying out the research and analysis – have urged companies to take up the credits.

David Collins, Managing Director, NMT Tax, pictured right, said: “R&D tax credits can provide substantial cash benefit to companies.

“In the current economic climate, more than ever, we would recommend that they are considered.”

R&D tax credits are a government supported incentive that allow companies to reclaim up to 33 per cent of eligible R&D expenditure as a cash repayment.

The scheme contributes to the government’s objective of boosting R&D spending to 2.4 per cent of Gross Domestic Product by 2027 and three per cent in the long-term.

The R&D tax relief scheme applies to companies that are developing new products, processes or services, or simply improving existing ones.

Qualifying companies typically undertake R&D activity across several years, leading to multi-year claims.

The government’s definition of qualifying R&D activity is broad and can apply to most sectors.

For first-time claimants it is usually possible to look-back for eligible spend over two accounting periods.

The most common sectors for R&D activity include manufacturing, IT, communications, software development, science and engineering.

In 2017/18 – the latest full year figures available – a total of 525 Dorset companies received a combined cash benefit of £35m from R&D tax credits, an average claim of £67,000.

A further breakdown shows that, in the same year, 310 companies in Bournemouth, Christchurch and Poole claimed a combined £20m of R&D tax cash benefit, an average of £65,000 per company.

This compares to 215 companies in the rest of the county, sharing £15m of cash benefit at an average of £70,000 per business.

Analysis of the UK Innovation Survey 2019 highlights that 38 per cent of UK businesses are ‘innovation active’.

Considered against the fact that 0.93 per cent of Dorset-based companies – and 1.18 per cent of UK companies – claimed R&D tax relief in 2017/2018, NMT Tax and SG Financial say it suggests there is scope for a significant increase in the take-up of R&D tax credits in both Dorset and throughout the UK.

David Collins, who founded NMT Tax, a specialist R&D tax advisor, last year, said: “The analysis suggests that many more companies in Dorset could benefit from R&D tax credits, which certainly supports what we see locally on a day-to-day basis.

“We work with Dorset companies in all sectors to secure R&D tax credits.

“It is possible to claim for internal and external projects and successful and unsuccessful projects.

“R&D tax credits can provide substantial cash benefit to companies and now in the current economic climate, more than ever, we would recommend that they are considered.”

Shaun Gomm, Managing Director of SG Financial, innovation and growth funding experts, pictured left, added: “Overall, the figures confirm that urban and rural Dorset are active areas for investment in innovation especially in the SME sector.

“Investment in innovation is seen as an enabler of productivity growth, which is a key priority area for Dorset and the UK.

“R&D tax credits can return substantial cash injections to companies, which in turn can be reinvested into innovation and growth to assist the post-lockdown economic recovery.”

The research and analysis was undertaken by NMT Tax and SG Financial using data from Companies House, the Department for Business, Energy & Industrial Strategy and HMRC’s R&D tax credit statistics.