Research by leading audit, tax and consulting firm, RSM UK has highlighted the hurdles media businesses face when claiming research and development (R&D) tax reliefs.
In a recent survey of media firms, 40% had made at least one claim for R&D tax relief. Of these businesses, less than a quarter (24%) had R&D claims approved by HMRC without challenge in the past year. A third (33%) had a claim which was challenged before HMRC finally approved it, and a further third (33%) had at least one R&D claim declined by HMRC in the last 12 months.
Commenting on this, RSM UK tax partner, Constantine Costas, said: “This research is concerning, as it suggests media businesses are struggling to make successful claims for research and development tax reliefs. These reliefs provide a vital lifeline to encourage businesses to develop new innovative technologies, which benefit their customers, their businesses, and the media industry as a whole.”
HMRC recently reported that it currently challenges around 20% of R&D claims overall, indicating that media businesses in particular are struggling to access the right advice needed to make their claims effectively.
Almost all media businesses surveyed (95%) had claimed some form of tax relief, with almost half (46%) claiming creative sector reliefs and 35% claiming Patent Box to offset the costs associated with undertaking groundbreaking research and development. Only 5% of those surveyed said they hadn’t claimed any type of tax relief, demonstrating that the vast majority of media businesses rely heavily on the incentives these reliefs provide.
The reduced credit rate now offered under the new merged R&D tax incentive regime is also likely to reduce UK PLC’s competitiveness with other countries, particularly compared with near neighbours such as Ireland, which has a 30% R&D credit relief vs 15% for the new UK rate.
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By GlobalDataCostas concluded: “The reduced credit relief, combined with increasing volumes of R&D enquiries that take too long to process, are holding the UK media industry back from competing internationally. To encourage innovation in the sector and improve the UK’s ability to compete, the Government needs to have a focused and efficient enquiry process, and must work to raise awareness of the support available to businesses.”