HMRC R&D tax credit statistics 2023: All you need to know

Following significant economic challenges, HMRC’s recent release on R&D tax credits for the tax year 2021-2022 provides an optimistic point of view on UK businesses’ robust and resilient entrepreneurial spirit.

The technical team here at RDI have analysed the latest HMRC data for the tax year 2021-2022 regarding Research and Development (R&D) tax credits and broken it down in an easy-to-read format for you.

Here's our key findings:

Introduction

This report is based on National Statistics produced by HM Revenue and Customs (HMRC) and offers insights into R&D tax credit claims for the tax year 2021-2022.

It's important to note that claims for this tax year can still be submitted beyond the cut-off date for the publication. As such, the statistics are provisional and have been adjusted to account for pending claims. Next year's publication will include revisions based on claims received after the cut-off date, which may lead to significant changes.

The statistical tables and additional information are available on GOV.UK , and the next release is planned for Autumn 2024.

Number of Claims

In the tax year 2021-2022, the total number of R&D claims is estimated at 90,315, a 5% increase from the previous year. This includes 79,205 Small or Medium-sized Enterprise (SME) scheme claims and 11,115 Research and Development Expenditure Credit (RDEC) scheme claims.

In the RDEC scheme, there has been a 6% increase in the number of claims since the previous year, driven by large companies making RDEC claims. Overall, both SMEs and large companies have increased their R&D tax relief claims.

Amount of Relief Claimed

Total support claimed through both R&D schemes for the tax year 2021-2022 is estimated at ￡7.6 billion, an 11% increase from the previous year. This comprises ￡4.8 billion claimed through the SME scheme and ￡2.8 billion claimed through the RDEC scheme.

Within the RDEC scheme, ￡2.4 billion has been claimed by large companies, and ￡415 million has been claimed by small and medium-sized companies. Although the SME scheme has a larger volume of claims, the average claim size is generally higher for RDEC claims.

Support claimed through the SME scheme has increased by 14% compared to the previous year, while the RDEC scheme also saw a 7% increase. The average claim value has increased by 6%, primarily driven by higher support claimed in the SME scheme. This increase may be attributed, in part, to recovery from the COVID-19 pandemic, which affected R&D activity levels in the tax year 2020-2021.

R&D Expenditure

Qualifying R&D expenditure used to claim R&D tax relief is estimated at ￡44.1 billion for the tax year 2021-2022, an 8% increase from the previous year. Most of this expenditure (60%) was incurred by companies claiming under the RDEC scheme. This increase in expenditure is observed across both schemes and may reflect an uptick in R&D activity following the COVID-19 pandemic.

Please note that these figures are provisional and subject to revision next year, which may result in significant changes.

Regional Analysis

Please note that these figures are based on the company's registered address and may not necessarily represent the location where R&D activity takes place.

The distribution of R&D tax credit claims by the company's registered address reveals a concentration of claims 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 also stands out, accounting for 11% of total claims 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 consistent with those seen in recent years.

Sectorial Trends

These figures reflect the number of claims and the amount claimed (￡ million) in various industry sectors for the tax year 2021-2022.

There is a concentration in the number of claims in the Information & Communication (23%), Manufacturing (23%), and Professional, Scientific & Technical (16%) sectors, accounting for 23%, 23%, and 21% of the total amount claimed, respectively. These trends remain similar to previous years.

Cost Band Analysis

The distribution of R&D tax credit claims by cost band shows a concentration in the lower bands (69% in cost bands up to ￡50k), which corresponds to the large volume of claims in the SME scheme.

The largest concentration in the amount claimed is in the ‘Over ￡2m’ band (27%), corresponding to R&D claims made by the largest companies.

First Time Applications

The number of first-time applicants in the SME and RDEC schemes has shown varying trends. In the tax year 2020-2021, there was a 1% decrease in the overall number of first-time applicants from the previous year. This is the second consecutive decrease in the number of first-time applicants. Prior to the 2019-2020 tax year, the number of first-time applicants had increased year-on-year. This decrease is driven by a reduction in the number of first-time applicants within the SME scheme. First-time applicants to the RDEC scheme have increased each year since the 2017-2018 tax year.

Conclusion

Overall, these statistics reflect a dynamic and evolving landscape of R&D tax credits, with businesses adapting and investing more in innovation.

If you are interested or have questions about whether your company qualifies for R&D tax credits, we invite you to get in touch with RDI Solutions and our expert team. We are here to provide guidance and support to help you navigate the intricacies of R&D tax relief and maximise your potential benefits. To date, we've helped over 3,000 businesses to receive over ￡200m through government-based specialist tax incentives.

Contact RDI Solutions

Website: www.rdisolutions.co.uk

Telephone: 0330 133 1856

Email: [email protected]