HMRC has just published its annual report on R&D Tax Credits Statistics which gives an insight into the volume and value of claims made and the demographics of companies that benefit from the scheme.
R&D Tax Credits are a tax relief designed to encourage innovation; they reward companies with a cash credit or tax reduction by allowing them to recover their eligible research and development costs. There are currently two main schemes – the SME scheme and the RDEC (Research & Development Expenditure Credit) scheme which is for large companies.
Since R&D Tax Credits were introduced in the UK in 2000, over 300,000 claims have been made and £33.3bn in tax relief claimed
As of 30 June 2020, there have been 59,265 R&D tax credit claims for 2018-19, of which 52,160 are in the SME R&D scheme. This equates to a value of 5.3bn worth of R&D Tax Credits claimed for 2018-19, corresponding to £35.3bn of R&D expenditure.
Although the volume of claims under the SME scheme is much larger than under the RDEC scheme, a similar proportion of the relief by value is claimed by large companies. This is because the amounts they claim are generally much larger than those claimed by SMEs.
SMEs working for large companies as sub-contractors or receiving related subsidies are not able to claim under the SME scheme but may be able to claim under the RDEC scheme. The number of these claims has also risen substantially in recent years.
R&D Tax Credits Statistics Headline Figures – Year on Year Increases
(2017-18 compared to 2016-17)
Total Value of R&D Tax Credits claims increased by 15% to £5.1bn
Total number of claims rose to 62,095 – an increase of 17%
Number of SME claims increased by 19% to 54,005
Number of Large Company claims under RDEC scheme increased by 7% to 8,085
Total value of R&D expenditure against which claims were made was £36.5bn – an increase of 8%
First time applicants
There have been 15,750 first time applicants for R&D Tax Credits in 2017-18, an increase of 10% from the previous year. This increase is largely driven by SME companies.
The number of SME first time applicants has increased by 13% from 12,350 in 2016-17 to 13,935 in 2017-18.
Once again it is positive to see that the number of businesses claiming continues to grow year on year, primarily driven by SMEs. There is an ongoing concern however that many companies are still missing out on this valuable incentive because they are unaware of their eligibility to make a claim. This is because the definition of R&D for tax purposes is a lot wider than many people consider. If you’ve looked at R&D Tax Credits before and concluded your business isn’t eligible, even if you’ve been told this by an accountant or other professional, it’s always worth getting a second opinion to check the advice you have received is correct, or if circumstances have changed. Now more than ever R&D Tax Credits can be a vital source of cash flow for businesses.
Location of Claimants
As in previous years, R&D claims are concentrated in companies with registered offices in London (20% of total claims and 29% of total amount claimed), the South East (15% of total claims and 19% of total amount claimed) and the East of England (10% of total claims and 12% of total amount claimed). However, the regional split is based on the registered head office location so may not be where all the R&D activity takes place.
Industry Sector
The ‘Manufacturing’, ‘Professional, Scientific and Technical’, and ‘Information and Communication’ sectors continued to have the greatest volume of claims, making up a total of 66% of claims and 71% of the total amount claimed for 2018-19.
There are no restrictions on which industry sectors can apply for R&D Tax Credits so whatever industry you are in, if you are undertaking work that seeks to achieve an advance in science or technology then you could be eligible to make a claim. Even projects which are unsuccessful in achieving the desired outcome can qualify for relief.
R&D Tax Credits Statistics – How the Figures are Prepared
The report is compiled using statistics from claims reported on the Corporation Tax return form CT600. The figures are for 2000-01 to 2018-19 and are based on returns received up to 30 June 2020. There are still nine months (1 April 2020 to 31 March 2021) in which claims in respect of 2019 can be made (because companies are allowed to claim up to 12 months after the filing deadline) and these claims will be incorporated in the 2020 Research and Development Tax Credit Statistics when they are released next year. The latest figures released this week update the 2018 figures to include claims received between April 2019 and March 2020.
As figures are not yet complete for 2018-19, any comparisons between previous years are made between 2017-18 and 2016-17. Information reported on in-year characteristics relates to 2018-19.
Source: Research and Development Tax Credits Statistics September 2020, HM Revenue & Customs
The full report can be viewed here.
Check Your Business Is Not Missing Out
Whether your company is already claiming R&D Tax Credits or you’ve never claimed before, it’s always worth checking to ensure you’re not missing out. Contact R&D Funding Group for a free, no obligation consultation. Call Stephen Dyson on 0161 464 6351, email sdyson@rdfunding.co.uk, or complete our contact form.