Research and Development Tax Credits – Statistics 2017
HMRC has published its latest statistics on Research and Development (R&D) Tax Credits which show a positive increase in the number of claims made and the amount being claimed year on year. This growth is primarily being driven by a rise in the number of SME claims.
Between 2000-01, when Research and Development Tax Credits were launched, and 2015-16, over 170,000 claims have been made and £16.5 billion in tax relief has been claimed.
The cost of support has increased substantially since 2012-13 and this combined with increased awareness of R&D Tax Credits has contributed to the increase in the value of support claimed by SMEs. The figures below are for claims made in 2015-16.
Number of Claims by Industry Sector:
20% Professional, Scientific and Technical
26% Information and Communication
The ‘Manufacturing’, ‘Professional, Scientific and Technical’, and ‘Information and Communication’ sectors continued to have the greatest volume of claims, making up a total of 73% of claims and 75% of the total amount claimed for 2015-16. The remainder of claims were spread across a range of industry sectors and whilst there are no restrictions on which type of business can apply for R&D Tax Credits, our experience has found that many businesses do not identify qualifying activities as R&D when in fact it is.
Claims by Location
R&D claims and the amount claimed is concentrated in companies with a registered office in London, the South East or the East of England (46% of all claims and 62% of the total amount claimed). Whilst the regional split is based on the registered head office location (so may not be where all of the R&D activity takes place), these figures suggest that a significant number of businesses in other areas of the country are missing out on the valuable funding that R&D Tax Credits can provide.
Type of Relief Claimed
The most common way for SMEs to claim R&D tax credits was by a deduction from corporation tax (CT) liability, with 12,700 claims made this way for 2015-16, compared to 4,420 claims made for a payable credit. Payable credits are claimed by loss-making companies which have no CT liability against which to set the deduction.
Amount of Relief Claimed
Of the £2.9bn claimed in 2015-16, £1.3bn was claimed through the SME scheme, £1.4bn by large companies under the RDEC scheme and £70m under the large company scheme. £95m was claimed by small and medium sized companies, including subcontractors, through the large company and RDEC schemes.
The total amount of support claimed by large companies has also increased, as companies have moved from the large company scheme to the RDEC scheme which has a higher rate of support. RDEC support to large companies rose by 17% from 2014-15 to 2015-16, reflecting the higher number of claims and the increase in the RDEC rate from 10% to 11%. RDEC has now replaced the large company scheme with effect from 1 April 2016.
The level of R&D expenditure used to claim R&D tax relief was £22.9bn in 2015-16, an increase of 4% from 2014-15. The majority of this expenditure (80%) was by companies claiming under the large company or RDEC schemes. SME expenditure made up only 20% of the total but showed strong growth year-on-year.
Whilst the increase in the uptake of R&D Tax Credits is very encouraging, it is clear that R&D Tax Credits are still an under-utilised resource and many companies are still missing out or under-claiming. It’s also concerning that the location of claims is concentrated in three specific regions and that businesses in the West, Midlands and the North are not fully realising the potential of R&D Tax Credits.
If you think your business is not eligible to claim it’s always worth talking to an R&D Tax Credits specialist to check your position. It’s recommended those businesses already claiming undertake an annual review to check they are claiming everything they are entitled to.
The full report can be accessed here.