The latest national statistics on R&D Tax Credits have been published today. HMRC’s report covers claims for the period up to year ending March 2021. As usual, the figures have been uplifted to include estimates for those not yet received whilst previous years’ estimated figures have been updated.
The total number of claims submitted has grown year on year, currently estimated to be 89,300 – an increase of 7%. This figure comprises 78,825 Small or Medium-sized Enterprise (SME) scheme claims and 10,475 Research and Development Expenditure Credit (RDEC) scheme claims.
The majority of claims made under the RDEC scheme are from SMEs (who claim under RDEC either because they are undertaking the R&D as subcontractors, or the R&D is subsidised, and so they are unable to claim under the SME scheme). Overall there is a 7% increase in the number of RDEC claims since the previous year although the number of claims from large companies has actually decreased by 9%.
The total value of claims currently stands at £6.6 billion, a decrease of 4% on the previous year. Although the volume of claims under the SME scheme is much larger than under the RDEC scheme, the average claim size is generally much larger for RDEC than SME. It is RDEC average claim sizes that have gone down in year ending March 2021, most likely attributed to the COVID-19 pandemic leading to a reduction in R&D activities.
SME Scheme:
- 39,915 claims for a deduction from corporation tax
- 38,910 claims which include a payable tax credit
- 78,825 – total number of claims
- £4.2 billion – total value of claims
RDEC Scheme:
- 3,990 claims from large companies
- 6,485 claims from SMEs claiming under RDEC scheme
- 10,475 – total number of claims
- £2 billion – claimed by large companies
- £365 million – claimed by SMEs
- £2.4 billion – total value of claims
Despite the latest increases being driven by SMEs, in the tax year 2019/20, there was a 4% decrease in the overall number of first-time applicants from the previous year. This decrease is due to a reduction in the number of first-time applicants within the SME scheme and is the first decrease since 2009/10.
Qualifying Expenditure: The amount of qualifying R&D expenditure used to claim R&D tax relief is estimated to be £38.1 billion for the tax year 2020 to 2021, a decrease of 11% from the previous year. 59% of this expenditure was by companies claiming under the RDEC scheme.
Region: The proportions of claims and amount claimed by region are very similar to those seen in recent years with the majority of claims coming from companies with a registered office in London (21% of total claims and 31% of total amount claimed) and the South East (15% of total claims and 18% of total amount claimed).
Industry Sector: There is a concentration in the number of claims in the Information and Communication (22%), Manufacturing (21%) and Professional, Scientific and Technical (19%) sectors, accounting for 25%, 23% and 22% of the total amount claimed, respectively. Again, this is a similar picture as seen in previous years.
The full report can be viewed on the government website here.
Is your business making the most of the R&D tax credits schemes?
As the number of claims for R&D Tax Credits continues to increase, the level of error and fraud has also grown to unprecedented levels. These tax incentives have come under the microscope over the last 12 months with HMRC now clearly focused on compliance. It’s more important than ever to ensure you work with a reputable R&D adviser with the necessary skills, knowledge and experience to accurately prepare claims that are both maximised and strictly HMRC compliant.
If you’d like a no-obligation chat about how R&D Funding Group can assist with your claims, please contact us.