Scotland misses out on tax credits as firms fail to claim R&D cash

Scottish companies claimed less than 4 per cent of the £1.1 billion handed out last year by the government in the form of research and development tax credits, according to new figures.

Firms north of the Border received £40 million in tax relief linked to R&D activity, reveals data from HM Revenue & Customs. It is the first time the publication has included a regional breakdown, meaning there is no comparative figure for the previous year.

However, Simon Burton, tax director at accountancy firm Johnston Carmichael, noted that regions of a comparable size claimed significantly more than Scottish firms. A total of £52m in R&D tax credits went to the north-west of England, while the east of England claimed £150m.

“If you look at the regional breakdown and compare Scotland with the likes of north-west England, with a population of 6.9 million, and east of England, with 5.8 million people, it shows we are significantly under-claiming research and development tax relief,” Burton said.

“One of the problems is that many businesses, SMEs in particular, are not identifying what actually qualifies for R&D. We’ve also seen a perception amongst many SMEs that it is not financially viable to make a claim but this is not necessarily the case and, as a result, they are losing tax relief in key areas.”

A total of 680 claims from Scotland were successful, including 500 from small and medium-sized firms that collectively received £20m. Large companies took a total of £19m, while £1m was shared across 40 claims from SMEs working as sub-contractors to larger firms.