HMRC statistics on Research and Development Tax Credits

We look at the latest statistics and insights from HMRC which provide a comprehensive overview of R&D tax credit claims for the tax year 2021 to 2022. We explore the increasing financial support, the shifting landscape of claims, regional and sectoral analysis, and the implications of these findings on businesses and the broader economic landscape.

Total R&D Tax Relief Claims: In the tax year 2021 to 2022, the estimated total R&D tax relief support claimed was £7.6 billion, an 11% increase from the previous year. This corresponds to £44.1 billion of R&D expenditure, an 8% increase from the previous year.
Number of Claims: There were 90,315 R&D tax credit claims for the tax year 2021 to 2022, a 5% increase from the previous year. These include claims from both Small or Medium-sized Enterprises (SMEs) and Research and Development Expenditure Credit (RDEC) schemes.
Claim Value: The average value of claims increased by 6% in 2021 to 2022, with an average increase of 9% in the SME scheme. This could be due to companies recovering from the impact of the COVID-19 pandemic.
Regional Distribution: Claims were concentrated in 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). However, the registered office location may not necessarily reflect where R&D activity takes place.
Industry Sectors: Information & Communication, Manufacturing, and Professional, Scientific & Technical sectors accounted for 62% of total claims and 67% of the total amount claimed in the tax year 2021 to 2022.
Cost Band Analysis: Most claims (69%) were in the lower cost bands (up to £50k), corresponding to SMEs. The largest concentration in amount claimed (27%) was in the 'Over £2m' band, representing claims by large companies.
First-Time Applicants: The number of first-time applicants decreased by 1% for the tax year 2020 to 2021, driven by a reduction in first-time applicants within the SME scheme. In contrast, first-time applicants for the RDEC scheme have consistently increased.
Error and Fraud: This report has not provided any update in this area. The latest figures, published in July 2023, estimated the overall level of error and fraud for both (SME and RDEC) reliefs for 2020 to 2021 is 16.7.% (£1.13 billion), which was significantly higher than the previously published estimate of 3.6% (£336 million) for 2020 to 2021.

HMRC note that the publication is based on provisional data, and figures may be revised in the future to account for late claims. Additionally, changes in R&D relief rates and their potential impact on claim amounts. The next release of statistics is planned for Autumn 2024.

This latest data from HMRC shines a spotlight on the remarkable role of R&D tax relief in fueling innovation and economic vibrancy. As businesses adapt and thrive in evolving landscapes, embracing these incentives is a strategic boon. The surge in R&D claims and investment, complemented by shifts in regional and sectoral dynamics, paints an inspiring picture of the UK's innovation prowess. It is strange that with all of the recent focus on fraud prevention, HMRC failed to provide any statistics in this area, however, with promising changes on the horizon, businesses are poised to seize even greater opportunities.

Looking forward, R&D tax relief continues to be a beacon of optimism, ushering in a future where innovation propels us toward unprecedented prosperity and success

Natalia Nazjer