A Glimpse into UK R&D Tax Relief Trends in 2021-2022
5 Oct 2023
The recently released HM Revenue and Customs (HMRC) National Statistics publication for the tax year 2021-2022 provides valuable insights into the state of Research and Development (R&D) tax relief in the United Kingdom. New statistics from HMRC shed light on how companies are benefiting from research and development (R&D) tax relief. In the year ending March 31, 2022, UK businesses claimed an impressive £7.6 billion in R&D tax relief, up by 11% from the previous year. Following a rare dip in the R&D claimed last year, it is very positive to see that the business claiming R&D is maintaining a positive trend.
Here are some key observations and viewpoints on the findings.
- The number of R&D tax credit claims increased by 5%, with 90,315 claims, and a 6% rise in average claim value. This includes total support claimed under SME scheme increase by 14% and those claimed under RDEC scheme by 7%.
- Consistent with earlier reported statistics, London and the South East saw significant concentrations of claims, though not always indicative of R&D activity. However, it is important to note that the registered office location may not be where all the R&D activity takes place.
- Unsurprisingly, dominant sectors continues to include Information & Communication, Manufacturing, and Professional, Scientific & Technical, making up 62% of claims.
- Around 69% claiming in lower cost band up to £50K.
- The largest concentration in amount claimed is in the ‘Over £2m’ band (27%), corresponding to R&D claims made by the largest companies.
- Larger companies increasingly recognized the benefits of R&D tax credits, leading to growth in first-time applicants for the RDEC scheme.
- HMRC acknowledged the importance of addressing errors and fraud within the schemes to maintain their integrity.
It’s fascinating to note that while the number of first-time applicants in the SME scheme has decreased, the RDEC scheme continues to see consistent growth in first-time applicants. This disparity can be attributed to several factors, including limited awareness, resource constraints, and the perceived complexity of R&D tax credits in the SME sector.
Another encouraging development is the 6% increase in the average claim amount. This suggests that businesses are potentially rebounding from the challenges brought on by the pandemic, showing a renewed commitment to research and development. Such investments are vital for long-term growth and innovation.
Moreover, concerns about potential fraud and misuse of the system, as highlighted in the report, have prompted HMRC to take proactive measures. The introduction of the R&D Additional Information Form is one such step aimed at safeguarding the integrity of R&D tax relief. It’s designed to prevent fraudulent claims and ensure that incentives are channeled towards genuine R&D efforts, ultimately benefiting businesses and nurturing innovation in the UK.
To remain compliant with the claims, it is really important to seek advice from reputable advisors, who have very good understanding of the legislation and industry knowledge.
If you’re planning to make an R&D tax relief claim, it’s crucial to grasp the recent changes made by HMRC to the R&D rules. This knowledge will enable you to ensure that your claim aligns effectively with HMRC’s guidelines.
At Invenics, we are proud to have some of the leading R&D practitioners with profound knowledge of the legalisations concerning R&D schemes in the UK and with deep industry experience. This combination of skills and expertise enable us to apply legislations and guidelines on projects that may contain eligible R&D .We are passionate about providing industry leading services ensuring our clients can confidently navigate the complexities of the R&D claim process and prepare robust and accurate claims that can stand the scrutiny. To explore our services and unlock your innovation potential, book an appointment by calling us at +44 (0) 2045 3791 23 or send us an email at firstname.lastname@example.org.