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Latest R&D Tax Credits data "is concerning for smaller businesses that rely on R&D credits to fuel innovation"

ended 26. September 2024

HMRC have just published the latest R&D Tax Credit stats for September 2024. Full report >> here <<. Any thoughts, send them across. Key points below.

  • the provisional estimated amount of total R&D tax relief support claimed for the tax year 2022 to 2023 was £7.5 billion, an increase of 1% from the previous year. This corresponds to £46.7 billion of R&D expenditure, 4% higher than the previous year
  • the amount of tax relief claimed through the SME scheme fell by 3% compared with the previous year, while the relief claimed through the RDEC scheme increased by 7%
  • the provisional estimated total number of R&D tax credit claims for the tax year 2022 to 2023 was 65,690, a decrease of 21% from the previous year. The decrease occurred in both schemes. The most notable impact was in the SME scheme, where the volume of claims is 23% lower than the previous year. In comparison, claims for the RDEC scheme fell by 9%
  • there is an above average drop in the number of claims up to £15,000 and an increase in the number of claims above £250,000. This has resulted in a 28% increase in the average claim value compared to the previous year. This explains why despite a large drop in the volume of claims the total cost has grown slightly
  • there is a concentration of claims by companies with registered offices in London (23% of total claims and 32% 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 & Communication, Manufacturing, and Professional, Scientific & Technical sectors continued to have the greatest volume of claims, making up 67% of total claims and 70% of the total amount claimed for the tax year 2022 to 2023

2 responses from the Newspage community

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Editor
Gabriel McKeown
Head of Macroeconomics at Sad Rabbit - Substack Newsletter
The UK's R&D landscape has become a tale of two worlds, where big business thrives while SMEs struggle, as the latest figures reveal a stark divergence in tax relief. Despite the provisional data showing a modest 1% increase in total R&D tax relief, beneath the headline lies a more complex narrative. The SME scheme, long considered the backbone of British innovation, has experienced a significant setback, with the number of claims plummeting by 23%. However, at the same time, there has been a 28% increase in the average claim value compared to the previous year, which has helped obscure the drop in claims due to the rise in the overall R&D tax relief figure. This dichotomy raises questions about the future of innovation in Britain and the effectiveness of the government's approach to fostering technological advancement at the SME level. The challenge for policymakers is to strike a balance that promotes innovation across the entire spectrum of businesses, not just those at the top.
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Zoe Goodchild
CEO at Innovate Accountancy Limited
HMRC’s latest R&D tax credit stats for 2022/23 offer a mixed bag of insights. The headline figure shows £7.5 billion in relief, a 1% increase from last year, which is positive on the surface. But dig deeper, and it’s clear there are some significant shifts in play, especially for SMEs. One of the most telling trends is the 3% decline in SME scheme claims, with an overall 23% drop in claim volumes year-on-year. This is concerning for smaller businesses that rely on R&D credits to fuel innovation. Whether it’s the increasing complexity of the claim process, or tighter HMRC scrutiny, SMEs seem to be struggling to access the support they need. Contrast this with the 7% rise in claims under the RDEC scheme, and it becomes apparent that larger companies are continuing to leverage the available relief. An interesting twist is the 28% rise in the average claim value, driven by a drop in smaller claims (under £15,000).