LATEST Government figures show that the number of claims for Research and Development tax relief by SMEs (small and medium-sized enterprises) in the West Midlands region rose by 33% in 2012-13 compared to the previous year.

In total, there were 1,090 claims for R&D tax credits by SMEs in the region worth £35 million in relief in 2012-13. That was up from 820 claims in 2011-12, worth £23 million in tax relief.

Large companies in the region made 145 claims for R&D tax credits, up 3.5% on 2011-12, and the value of relief claimed by large companies increased from £49 million to £55 million.

Nationally, the total number of claims (combining the SME and large companies R&D schemes) rose to 15,930, an increase of 26% compared to 2011-12, with the total amount of support claimed reaching £1.4 billion, an increase of £150 million from the previous year.

R&D tax credits, which were first introduced in 2000, are a tax relief designed to encourage greater R&D spending and innovation. Since the introduction of the scheme, the available tax breaks have become more generous and HMRC has broadened the way it interprets and applies the rules in order to provide greater stimulus for innovation in the economy.

Rebecca Reading, tax partner at Baker Tilly’s Birmingham office, said: ‘There has been a significant rise in the numbers of SMEs in the West Midlands claiming this type of tax relief, which reflects the national trend.

"This is due, in part, to changes in the rules regarding SME expenditure, which came into force from April 1, 2012, but it is also a sign of a returning confidence in the region’s economy and an increased awareness of this type of tax relief among SMEs.

"Many businesses across the region are realising that R&D tax relief isn’t just for the manufacturing or tech sectors and can apply to many other sectors that are developing innovative products or processes."