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HMRC Reports Significant Increase in Uptake of R&D Tax Credits

Grid with diagonal arrow showing growth in R&D Tax Credits 2018
Number of R&D Tax Credit claims continues to increase year on year with £21.4 billion in tax relief claimed since the scheme’s introduction in 2000-01

R&D Tax Credits are a tax relief designed to encourage greater R&D spending, leading in turn to greater investment in innovation. They work by either reducing a company’s liability to corporation tax or by making a payment to the company.

HMRC’s annual report on Research and Development Tax Credits statistics has just been published and once again shows that the uptake of R&D Tax Credits continues to increase.

For 2015-16 (the latest year for which complete figures are available) claims were made against £28.9bn worth of R&D expenditure – an increase of 16% on the previous year. The total number of claims made was 43,040 – a 22% increase on the previous year whilst the value of tax relief claimed rose by 25% to £3.7bn.

 

Number of SME claims more than doubled since 2011-12

The number of SME claims for 2015-16 was 36,820 (23% year on year increase) whilst there were 6,215 claims for the Large Company and RDEC schemes (17% increase).

More companies have been eligible to claim under the SME scheme since 2012 when the requirement for a minimum R&D expenditure of £10,000 was removed. There have also been increases in the SME enhanced expenditure rate and an increase in the SME payable tax credit rate since then.

It’s these changes combined with an increased awareness of R&D Tax Credits amongst SMEs that has led to the number of SME claims more than doubling since 2011-12.

 

71% of claims from ‘Manufacturing’, ‘Professional, Scientific and Technical’, and ‘Information and Communication’ sectors

For 2016-17 the majority of claims once again came from the ‘Manufacturing’ (25%), ‘Information Communication’ (26%), and ‘Professional, Scientific and Technical’ (19%) sectors. This accounted for 28%, 24% and 23% of the total amount claimed respectively. Whilst coding of industry sectors does not always reliably describe the sector of companies’ R&D activity, it does pose questions as to how many businesses in other sectors could potentially claim.

 

45% of all claims and 60% of total amount claimed by companies with registered head office in London, the South East or the East of England

The regional split of claims for 2016-17 shows the majority coming from London, the South East and East of England; figures similar to those reported last year. This is based on registered head office location so does not necessarily reflect where the R&D actually took place. This does continue to raise concerns however that eligible companies in other areas of the country are still missing out on R&D Tax Credits.

Once again, it’s encouraging that the uptake of R&D Tax Credits continues to increase but there are still thousands of eligible companies who are not yet claiming. R&D Funding Group helps businesses across the UK maximise their claims for R&D Tax Credits. We work directly with businesses of all sizes as well as providing our services through Accountants and Business Advisors.

For more information, or a free review please contact Stephen Dyson on 0161 464 6351 or email sdyson@rdfunding.co.uk.

The full report can be accessed here: R&D Tax Credit Statistics 2018.