HMRC have today released their 2023 annual report on R&D Tax Credits Statistics, providing information on the number of companies claiming R&D Tax Credits and the amounts claimed. The latest tax year for which figures are available is 2021-22 but it must be noted that these figures are still provisional and will be amended in next year’s report, due to companies still being able to submit claims for that year.
The R&D Tax Credits Statistics 2023 report provides the following provisional estimates for the tax year 2021-2022.
£4.8 billion – Total value of claims through SME scheme – 14% increase on previous year
£2.4 billion – claimed by large companies
£415 million – claimed by SMEs
£2.8 billion – Total value of claims through RDEC scheme – 7% increase on previous year
The SME and RDEC figures combined give a grand total value of £7.6 billion R&D tax relief claimed, an 11% increase on the previous year. The total value of corresponding R&D expenditure was £44.1 billion, an increase of 8% on the previous year. 60% of this expenditure was by companies claiming under the RDEC scheme.
The average claim value has increased by 6% overall compared to the previous year, driven by increased support claimed in the SME scheme. HMRC state this increase may in part be due to recovery from the COVID-19 pandemic, which may have prevented some R&D activity taking place. There was no growth in R&D relief claimed in the 2020 to 2021 tax year, which is out of step with recent years.
A cost band analysis found that 69% of claims were for a value of up to £50K (this was split across the 8 lowest cost bands) which corresponds with the large number of claims in the SME scheme. The largest single cost band was the ‘Over £2m band’ with 27% of total claims which corresponds to claims made by the largest companies.
Number of Claims – SME Scheme:
37,455 – claims for deduction from CT liability
41,745 – claims for payable tax credit
79,205 – Total number of SME scheme claims – 4% increase on previous year
Number of Claims – RDEC Scheme:
4,695 – claims from large companies
6,420 – claims from SMEs
11,115 – Total number of RDEC scheme claims – 6% increase on previous year
The figures for the SME and RDEC schemes combined give a grand total of 90,315 R&D Tax Credit claims made for the tax year 2021-22 which is an increase of 5% on the previous year. This increase in the total number of claims is driven by a rise in claims across both the SME and RDEC schemes.
Note that SMEs claiming under the RDEC scheme do so either because they are claiming as sub-contractors or because the R&D is subsidised and they are therefore unable to claim under the SME scheme. The increase in the number of RDEC claims however, is driven by an increase in the number of large companies claiming.
Although the volume of claims under the SME scheme is much larger than in the RDEC scheme, the average claim size is generally much larger for RDEC than SME.
As in recent previous years, the majority of claims come from companies with registered offices in London (22% of total claims and 32% of total amount claimed), and the South East (15% of total claims and 18% of total amount claimed).
The East of England has the third largest amount claimed with 11% of the total but is the fourth largest region based on the number of claims. The North West has the third largest number of claims but is the fourth largest region based on the amount claimed. It must be noted however that the registered office location may not be where all the R&D activity actually takes place.
Predominant Sectors Claiming
The Information & Communication, Manufacturing, and Professional, Scientific & Technical sectors continued to have the greatest volume of claims, making up 62% of total claims and 67% of the total amount claimed for the tax year 2021 to 2022. The breakdown of these was as follows:
- Information & Communication (23% of claim numbers, 23% claim value)
- Manufacturing (23% claim numbers, 23% claim value)
- Professional, Scientific & Technical (16% of claim numbers, 21% claim value)
First Time Claimants
Data in this section of the report only goes up to 2020-21 as 2021-22 partial figures have not been included. For the second consecutive year, in 2020-21 there was a slight decrease in the over-all number of first-time applicants claiming. This decrease of 1% can be attributed to a reduction in first time applicants in the SME scheme as the RDEC scheme has seen an increase in first time applicants every year since 2017-18.
In 2020-21 there were:
- 16,240 SME first time applicants – decrease of 3% on previous year
- 2,705 RDEC first time applicants – increase of 14% on previous year
R&D Tax Reforms
In last year’s Autumn Statement and this year’s Spring Budget, various changes to the R&D tax relief schemes were announced. This included a reduction in the SME scheme rates and an increase in the RDEC rate. However, as the rate changes only apply to R&D activities undertaken from 1st April 2023 onwards, the impact of this will not be seen in the R&D tax credits statistics for a few years as figures for the financial year 2023-24 will not be published until Autumn 2025.
With so much changing with R&D tax credits in 2023, businesses have had to adapt their processes to ensure compliance with HMRC’s new rules. If you’re still unsure how the changes will affect you and the new responsibilities that now come hand in hand with claiming, contact us for a free consultation and see how we can help.
HMRC’s full report on R&D Tax Credits Statistics 2023 can be viewed here.