Blog: R&D Tax Credit Statistics 2023
This blog summarises the most recent report by HMRC and provides information on the number and cost of R&D tax credit claims for a specific financial year (latest available: 2021-2022. Claims for that year can still be submitted and the figures are provisional. Statistics for previous years have been revised and may change in future publications.
Number of claims
The total number of R&D claims for the tax year 2021 to 2022 is estimated to be 90,315, which is 5% more than the previous year. Of these claims, 79,205 are Small or Medium-sized Enterprise (SME) scheme claims and 11,115 are Research and Development Expenditure Credit (RDEC) scheme claims. Further, the SME scheme claims can be divided into two categories – 37,455 claims which are solely for a deduction from CT liability and 41,745 claims which include a payable tax credit element in the tax year 2021 to 2022. In the case of the RDEC scheme, 4,695 claims are from large companies, and 6,420 claims are from SMEs claiming under the RDEC scheme because they are undertaking the R&D as subcontractors or the R&D is subsidised, and so they are unable to claim under the SME scheme. There has been a 6% increase in the number of RDEC claims since last year, primarily due to the rise in the number of large companies claiming RDEC. Overall, SMEs and large companies have seen a slight increase in R&D tax relief claims.
Amount of relief claimed
In the tax year 2021 to 2022, the total support claimed through both R&D schemes is estimated to be £7.6 billion, an increase of 11% from the previous year. The support is made up of £4.8 billion claimed through the SME scheme and £2.8 billion claimed through the RDEC scheme. The average claim size is much larger for RDEC than SME. The increase in support claimed may be due to recovery from the COVID-19 pandemic. Changes to R&D relief rates were announced, with the SME enhancement rate decreased to 86% and the SME credit rate reduced to 10%, while the RDEC rate was increased to 20%. These changes take effect on expenditures incurred from 1 April 2023.
Regional and industry sector analysis
Companies with registered offices in London account for 22% of total claims and 32% of total amount claimed, while those in the Southeast account for 15% of total claims and 18% of total amount claimed. The East of England has the third largest amount claimed, contributing 11% of the total but is the fourth largest region in terms of number of claims. Similarly, the Northwest has the third largest number of claims but ranks fourth in terms of the amount claimed. These proportions of claims and amounts claimed by region have been consistent with those seen in recent years. As for the sectors, 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.
Error and fraud
In HMRC’s annual report and accounts for the 2022 to 2023 tax year an updated estimate of error and fraud in the R&D schemes for claims received in 2020 to 21 was published. Details are included in the paper on the department’s approach to the R&D reliefs. In the resource accounts in the annual report, for illustrative purposes, HMRC also considered the possible error and fraud position for 2022 to 2023 expenditure. Details are set out on page 258 of the HMRC annual report and accounts 2022 to 2023. The statistics contained in this publication do not include any assessment of the levels of error and fraud within the schemes.
The R&D tax credit landscape in the UK continues to evolve, indicating a positive environment for innovation and development. In the wake of the pandemic, it’s evident that R&D is a crucial area for investment. Whether you’re a small business or a large corporation, keeping up with these trends can provide valuable insights into strategic R&D investments for the future. In 2023, the HMRC R&D Tax Credit scheme is set to undergone significant changes, which has been overwhelming and confusing for businesses that rely on these credits to support their research and development efforts. However, MPA has recognised this issue and taken steps to make it easier for businesses to stay informed about all the changes. We have put together a comprehensive knowledge hub that is entirely dedicated to the R&D Tax Credit changes. The hub has been designed to provide you with all the latest news and updates regarding the R&D Tax Credit scheme in one convenient space, making it easier to stay up to date, helping to inform your business decisions