The HMRC has recently released their latest R&D tax credit statistics. These statistics come from the R&D tax credits claimed for the year ending March 2020. The numbers may increase as time goes on as claims can still be submitted through extensions and amendments.
Despite the hit to the economy as a result of the pandemic, where many workers stayed at home and businesses were at a standstill, the number of claims for R&D tax credit relief increased by 16% from the prior year. Similar increases were seen in the total relief claimed and the total expenditures incurred with 19% and 15% increases respectively.
Small or Medium-sized Enterprise Scheme claims totalled 76,225. These were split nearly down the middle with half of the claims made purely for a deduction from CT liability, and the other half including a payable tax credit.
9,675 claims fell under the Research and Development Expenditure Credit (RDEC) scheme. Within this scheme, 45% came from large companies, and the remaining 55% came from SMEs that claim through RDEC as subcontractors.
Claims by Location and Industry
Claims continue to be focused around the London and South East areas, representing 35% of companies and 49% of the total claimed in March 2020.
Information and Communication, Manufacturing, and Professional, Scientific and Technical sectors continued to have the greatest volume of claims, making up 64% of claims and 69% of the total amount claimed for the year ending March 2020.
Implications and Cause for Concern
We are seeing positive growth towards the UK’s goal of achieving R&D expenditure equal to 2.4% of GDP by 2027 from the current standing of 1.7%.
However, the Office for National Statistics (ONS) believes that what’s being paid out in R&D tax relief is increasingly unrelated to the growing R&D spend. While calculation methods are separate, a comparison of the ONS Business Enterprise Research and Development (BERD) estimates and the HMRC statistics shows vastly different results. BERD indicates that R&D spend is around the £25.9 billion mark, significantly smaller than HMRC’s £47.5 billion.
Recently, the HMRC completed a consultation on each of the two R&D tax reliefs and their effectiveness. The outcome has not yet been released but could radically change the schemes. In the meantime, HMRC is focused on mitigating fraud with increased levels of compliance checks and enquiries.
- The number of R&D claims increased by 16% from the previous year, with an estimated total of 85,900 claims
- The estimated relief claimed for this year is £7.4 billion, an increase of 19% from the prior year
- These claims show £47.5 billion of R&D expenditure, 15% higher than the previous year
- The Information and Communication, Manufacturing, and Professional, Scientific and Technical sectors continued to have the greatest volume of claims, making up 64% of claims and 69% of the total amount claimed for the year ending March 2020
- HMRC has increased their audits and enquiries to cut back on R&D tax relief fraud
Who We Are:
Swanson Reed is one of the UK’s leading R&D Tax Relief consultancies. We manage all facets of the SR&ED tax credit program, from claim preparation and audit compliance to claim disputes.
If you would like to find out more about how your business could benefit from R&D Tax Credit, contact a Swanson Reed R&D Tax Advisor today.