Statements: Research and Development Tax Credits Statistics: September 2022
1. Key points
- the provisional estimated amount of total Research and Development (R&D) tax relief support claimed for the tax year 2020 to 2021 was £6.6 billion, a decrease of 4% from the previous year. 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, an increase of 7% from the previous year. The increase is driven by a 7% rise in the number of R&D claims within the SME scheme to 78,825
- this means there was a 10% decrease in the average value of claims in 2020 to 2021, which could be due to the impact of the COVID-19 pandemic, which may have prevented some companies from carrying out their normal levels of R&D activity
- there is 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). However, the registered office location may not be where all the R&D activity takes place
- the Information and Communication, Manufacturing, and Professional, Scientific and Technical sectors continued to have the greatest volume of claims, making up 62% of total claims and 70% of the total amount claimed for the tax year 2020 to 2021
This is a National Statistics publication produced by HM Revenue and Customs (HMRC).
It provides information on the number of companies claiming Research and Development (R&D) tax credits and the associated cost to the Exchequer for claims covering accounting periods that end in a particular financial year. The latest year information is available for is the tax year 2020 to 2021.
Claims for the tax year 2020 to 2021 can still be submitted past the cut-off date for this publication. The statistics for the latest tax year are provisional and have been grossed up to account for claims not yet received. Statistics will be revised in next year’s publication to include claims received after the cut-off date, which can sometimes result in large changes between the publications. Similarly, this year’s publication revises figures for tax years 2018 to 2019 and 2019 to 2020.
The statistical tables are published on GOV.UK alongside this commentary document, together with information on the background and methodology.
The next release is planned to be in Autumn 2023.
Statistical contacts: S Austin, C Powell and M Ali; firstname.lastname@example.org
Media enquiries: HMRC Press Office; email@example.com
3. Number of claims
The total number of R&D claims for the tax year 2020 to 2021 is estimated to be 89,300 – an increase of 7% from the previous year (figure 1 and table RD1).
This is comprised of 78,825 Small or Medium-sized Enterprise (SME) scheme claims and 10,475 Research and Development Expenditure Credit (RDEC) scheme claims. The number of SME scheme claims can be broken down as: 39,915 claims which are purely for a deduction from CT liability and 38,910 claims which include a payable tax credit element in the tax year 2020 to 2021.
In the RDEC scheme, 3,990 claims are from large companies and 6,485 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. This is a 7% increase in the number of RDEC claims since last year.
The driving factor in this growth has been more small or medium-sized enterprises making claims, representing 7% growth within the SME scheme and 20% growth within the RDEC scheme. This is despite a 9% decrease in the number of RDEC claims from large companies.
4. Amount of relief claimed
The total support claimed through both R&D schemes for the tax year 2020 to 2021 is estimated to be £6.6 billion (figure 2 and table RD2). This is a decrease of 4% from last year’s total of £6.9 billion.
The £6.6 billion is comprised of £4.2 billion claimed through the SME scheme and £2.4 billion claimed through the RDEC scheme. Within the RDEC scheme £2 billion has been claimed by large companies and £365 million has been claimed by small and medium sized companies. Although the volume of claims under the SME scheme is much larger than under the RDEC scheme, the average claim size is generally much larger for RDEC than SME. However, RDEC average claim sizes have gone down in the tax year 2020 to 2021. This could be due to several factors, most obviously the impact of the COVID-19 pandemic.
The total support claimed through the SME scheme has increased by 2% compared with the previous year. The total support claimed through the RDEC scheme has decreased by 13% since the previous year.
The cost of support for both the SME and RDEC schemes has increased substantially in recent years. The increase in the SME payable credit rate from 11% to 14.5% in April 2014 and the rise in the SME enhanced expenditure rate to 130% in April 2015 have contributed to the growing costs of the SME scheme. The RDEC rate also had increases during this time. The RDEC rate increased from 11% to 12% on expenditure incurred on or after 1 January 2018. It was also raised to 13% for expenditure incurred on or after 1 April 2020.
Figure 2: Total support claimed through R&D tax credits by scheme, 2014-15 to 2020-21 (£ million)
5. Research and Development expenditure
The amount of qualifying R&D expenditure used to claim R&D tax relief is estimated to be £38.1 billion for the tax year 2020 to 2021, a decrease of 11% from the previous year (figure 3 and table RD4). Most of this expenditure (59%) was by companies claiming under the RDEC scheme.
The decrease in expenditure from the previous year is primarily from the RDEC scheme where expenditure by large companies and SMEs decreased by 20% and 5% respectively. As explained above, these figures are provisional and will be revised next year, which could result in large changes.
Figure 3: R&D expenditure used to claim R&D tax credits by scheme, 2014-15 to 2020-21 (£ million)
6. Regional analysis
Figures 4 and 5, and table RD5 show the regional distribution of R&D tax credit claims by the company’s registered address for the tax year 2020 to 2021. The registered address may not be where actual R&D activity is carried out.
This 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). 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.
Figure 4: Number of R&D tax credit claims by region of company registered address, 2020-21
Figure 5: Amount of R&D tax credits claimed by region of company registered address, 2020-21 (£ million)
7. Industry sector analysis
Figures 6 and 7, and table RD6 show the distribution of R&D tax credit claims by industry sector for the tax year 2020 to 2021. The coding of industry sectors may not always reflect the sector of companies’ R&D activity.
There is a concentration in the number of claims in the Information and Communication (22%), Manufacturing (21%) and Professional, Scientific and Technical (19%) sectors, accounting for 25%, 23% and 22% of the total amount claimed, respectively.
Figure 6: Number of R&D tax credit claims by industry sector, 2020-21
Figure 7: Amount of R&D tax credits claimed by industry sector, 2020-21 (£ million)
8. Cost band analysis
Figures 8 and 9, and table RD7 show the distribution of R&D tax credit claims by cost band for the tax year 2020 to 2021.
There is a concentration in the number of claims in the lower bands (72% in cost bands up to £50k), which corresponds to the large volume of claims in the SME scheme.
The largest concentration in amount claimed is in the ‘Over £2m’ band (26%), corresponding to R&D claims made by the largest companies.
Figure 8: Number of R&D tax credit claims by cost band, 2020-21
Figure 9: Amount of R&D tax credits claimed by cost band, 2020-21 (£ million)
9. First time applications
Figure 10 and table RD8 show the number of first-time applicants in the SME and RDEC schemes for each year. Partial data for the tax year 2020 to 2021 has not been included in this chart.
In the tax year 2019 to 2020, there was a 4% decrease in the overall number of first-time applicants from the previous year. This is the first decrease in the number of first-time applicants since the tax year 2009 to 2010. This decrease is driven by a reduction in the number of first-time applicants within the SME scheme.
Figure 10: Number of first-time applications by scheme, 2014-15 to 2019-20
For the tax year 2019 to 2020, the number of first-time applicants in the SME scheme was 16,595, a decrease of 7% from the previous year. This is the first time in 14 years that there has not been growth in the number of first-time applicants in the SME scheme.
The number of first-time applicants for the RDEC scheme was 2,330 for the tax year 2019 to 2020; a 19% increase from the previous year. This is unusual – generally, since the introduction of RDEC, first-time applicant growth for the SME scheme has been stronger than for RDEC. However, as seen in figure 10, SME first-time claimants make up a majority of all R&D tax relief claimants.
10. Comparison with ONS BERD estimate
The Office for National Statistics (ONS) publishes several additional National Statistics on R&D in the UK, including the Business Expenditure on Research and Development (BERD) survey. Previous releases of R&D tax credit statistics have described differences between HMRC and ONS estimates of R&D expenditure, such as method of data collection, data coverage and definitional differences, that mean that the two estimates are not directly comparable.
In our efforts to improve cross publication coherence, HMRC and the ONS have been collaborating to compare the estimates. ONS has published a joint ONS–HMRC article that describes how to interpret both sources and outlines recent methodological changes to the BERD estimates. Please see the joint article for more information.