Northern Ireland companies 'still leaving money on Treasury's table'

SMALL businesses in the north are losing out on a combined millions of pounds in tax rebates - often because they assume their projects are not eligible under R&D tax credit rules because they are not in the science or technology sectors.

New figures from HMRC reveal that while companies in Northern Ireland claimed around £135 million last year, at an average of £59,210 per claimant, the region is still the poor relation of the UK.

The north accounts for just 2.65 per cent of the total number of claims on a national level and only 1.8 per cent of the total monetary benefit claimed.

And according to Bangor-based specialist R&D tax credit consultancy firm the Momentum Group, too many companies in Northern Ireland are frustratingly still not aware or fully optimising the financial benefits available - and are effectively leaving the money on the Treasury's table.

“There has been a serious shift in how Northern Ireland's larger companies are benefitting from the scheme, with a 33 per cent increase in the number of claims. Yet the monetary value of these have decreased by 25 per cent,” says Momentum Group managing director Tom Verner.

“Despite the one-two punch that Covid-19 and Brexit have served a number of industries and sectors over the past year, companies across Northern Ireland are increasingly making use of the R&D tax relief schemes.

“These latest HMRC figures show that, on a directly comparative level, Northern Ireland firms hold their own against the rest of the UK.

“With the red tape caused by Brexit and the economic downturn caused by the pandemic, it is important that innovative firms do not pass this generous initiative by.”

The statistics come as the UK government looks to modernise how R&D tax credits could work in the future.

Recent legislation changes mean an SME can now claim up to £20,000, plus 300 per cent of its total PAYE and national insurance contributions liability.

Of the 2,280 Northern Ireland claims, 2,160 were by SMEs with the remainder claimed under the scheme for large companies.

Of those 2,160 SME claims – an increase of 13 per cent from the previous year – 1,980 were under the SME scheme whilst 180 were undertaken by SMEs under the large company scheme.

Stephen Kelly, chief executive of Manufacturing NI, said: “It's encouraging to see an increase in the number of claims made by Northern Ireland companies.

“Every day we see incredible examples of innovation across the manufacturing industry here. This is heavily underpinned by R&D – be it through investing in people and skills, new equipment, improved products or processes. Given the number of challenges presented by Brexit and Covid-19, financial incentives such as these will undoubtedly prove extremely useful for firms across Northern Ireland.”

And Leslie Orr, director of ADS NI, the representative body for companies in the aerospace, defence, security and space sectors, believes the R&D tax credit schemes could make a vital difference for local firms.

He said: “The Northern Ireland aerospace industry was one of the first sectors of the economy to feel the impact of the pandemic. A considerable number of jobs were impacted at a local level due the ripple effect caused by global lockdowns, the near complete cessation of air travel.

“With Northern Ireland known for developing world-class technologies for these sectors, thanks to a strong engineering background which has been complemented by robust research and expertise, it is imperative that all companies in the supply chain recognise the impact schemes such as these can have on their bottom line. Don't leave the money on the table.”

Mr Verner continued: “Whilst uptake of the UK government's R&D tax credit schemes are increasing across the UK as a whole and is very healthy in certain regions, not all companies in Northern Ireland are reaping the full benefits of this valuable tax initiative.

“The statistics also show there is an increasing number of claims being made across nearly every sector, including those that would be considered less obvious, such as mining and quarrying.

“Additionally, local companies could be under-claiming or over-claiming because their technical project activities and associated expenditure are not being accurately interpreted against government legislation.

“As well as the introduction of increased scrutiny over claims by HMRC, the process of claiming is very much a technical assessment, so it is important that companies of all sizes instruct a specialist advisor to handle this for them.”

Since its inception in 2009, Momentum has helped its clients identify more than £150 million in eligible R&D expenditure. We are specialist R&D tax credit consultants.