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Every September, HMRC publishes its latest statistics around R&D Tax Credits. We’ve taken a look at what’s just been released for the year 2020-2021.
Every September, HMRC publishes its latest statistics around R&D Tax Credits. Offering a fascinating insight into which sectors are claiming and where, we’ve taken a look at what’s just been released for the year 2020-2021.
The R&D Tax Credits scheme was launched back in 2000 by the UK government as a way to encourage companies to invest in innovation. Today, it’s one of the most generous tax relief schemes around, offering as much as 33 pence for every £1 of eligible R&D expenditure back to companies. This is done either by reducing their Corporation Tax liability, or - where the company is loss-making - a cash payment.
A vast array of R&D projects and costs are claimable under the scheme, although exactly how much can be claimed depends on whether the company uses the SME scheme or RDEC.
Over the course of 2020 to 2021, the provisional estimated amount of total Research and Development (R&D) tax relief support claimed was £6.6 billion. Compared to the previous year this is a decrease of 4%. This corresponds to £38.1 billion of R&D expenditure, 11% lower than the previous year
Conversely, the provisional estimated total number of R&D Tax Credit claims for the tax year 2020 to 2021 was 89,300, up 7% from the year previously. The increase is driven by a 7% rise in the number of R&D claims within the SME scheme to 78,825. This shows a 10% decrease in the average value of claims in 2020 to 2021, possibly because of the COVID-19 pandemic, which may have prevented some companies from undertaking their usual levels of R&D work.
Although the R&D Tax Credits scheme is open to all UK companies regardless of size or industry, there are naturally certain sectors that are bigger claimers than others.
Interestingly, but perhaps unsurprisingly, the highest number came from the Information and Communication sector at 22% of all claims. This was closely followed by Manufacturing at 21% and the Professional, Scientific and Technical sectors at 19%.
The data also shows a concentration of claims by companies with registered offices 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). This is perhaps not so surprising considering London and the South East have the highest number of registered businesses in the UK. Of course, it's worth remembering that the registered address of the business may not necessarily be where the R&D work itself was carried out.
The East of England has the third largest amount claimed with 12% 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. The proportions of claims and amount claimed by region are like those seen in recent years.
The full latest R&D tax relief statistics can be found on the Gov.uk website.
It’s great to see that after more than 20 years in existence huge numbers of UK companies are benefitting from the R&D Tax Credits scheme. However, even amongst the top claiming sectors, there are businesses still missing out on improving their R&D operations by claiming R&D tax credits.
This can be for a wide variety of reasons, but one thing is for sure - it’s a massive missed opportunity for that business as well as the UK economy.
This is a real shame as average claims can be very worthwhile to small innovative businesses. Furthermore, the resulting cash is almost always invested back into R&D by most companies.
Even if your company has claimed R&D tax relief before, every claim is different and unique. Knowing exactly which of your R&D costs are claimable – and which are not – is extremely challenging, not least because the rule and guidelines often change.
Having spent time getting to know your innovative project(s) to ensure they qualify, as well as your business and R&D costs, we’ll see your application through from start to finish.
Call us on 0207 118 6045 or send us a message and we'll be pleased to call you back.