New 2021 HMRC R&D Tax Credit Statistics Released
What is the HMRC R&D Tax Credit Statistic Report?
HM Revenue and Customs (HMRC) have released their latest Research and Development (R&D) Tax Credits Statistics Report; sharing data for accounting periods ending during the 2019-20 tax year. The report, published each year, provides valuable information on the number of UK companies benefiting from the relief and the value of the cash benefits secured.
LimestoneGrey has analysed the data to uncover the key R&D tax credit trends, assessing to what extent UK companies are utilising this valuable government incentive.
R&D Tax Credit Statistics: Key Facts
Since its inception in 2000, the number of R&D tax credit claims submitted to HMRC has comfortably surpassed 300,000, with companies successfully recovering over £40bn in tax relief over this period.
>300,000
Number of R&D tax credit claims submitted
>£40bn
Total amount of R&D tax relief support claimed
The Latest Report has Highlighted Key Facts for 2019-20
The HMRC statistics contain a plethora of data for analysis. The concern that many R&D tax advisors have is that they are just numbers which no substance or explanation. Despite the lack of clarity, we are able to draw meaningful conclusions.
The number of claims submitted have increased by 16% from 2018-19, leading also to an increase in the total R&D tax credit relief claimed of 19%. The increase is primarily driven by a 16% rise in the number of SME R&D claims to 76,225.
There was a total of 9,675 Research and Development Expenditure Credit (RDEC) scheme claims, 4,370 claims are from large companies and 5,305 claims are SMEs that claim under the RDEC scheme as subcontractors.
85,900
Number of R&D tax credit claims submitted in 2019-20
16%
Increase in the number of claims submitted in 2019-20, compared to previous year
£7.4bn
Total amount of R&D tax credits relief claimed in 2019-20
Continued concentration of sector* claims
The ‘Manufacturing’, ‘Professional, Scientific and Technical’, and ‘Information and Communication’ sectors continue to have the greatest volume of UK claims, making up a total of 63% of claims and 69% of the total amount claimed for SME relief in 2019-20.
This is by no means a surprise. R&D is historically embedded in the culture and business strategy of these sectors.
However, despite their dominance, sectors that are not traditionally associated with research and development activities are growing. Accommodation and food, agriculture and construction are all sector that have seen dramatic growth in the number of SME claims submitted, with increases of 86%, 95% and 83% retrospectively from 2018-19. Despite the increased number of claims, the accommodation and agriculture sectors have seen a decrease in their average SME claim value, with construction only seeing a marginal increase, indicating that smaller SMEs within these sectors are taking advantage of the relief.
Total number and value of SME claims per sector (£m)
Agriculture, Forestry, Fishing
1,035 claims at a value of £40m
Mining & Quarrying
65 claims at a value of <£10m
Manufacturing
16,265 claims at a value of £785m
Electricity, Gas, Steam and Air Conditioning
115 claims at a value of £10m
Water, Sewerage and Waste,
475 claims at a value of £25m
Construction
5,585 claims at a value of £300m
Wholesale & Retail Trade, Repairs
8,795 claims at a value of £305m
Transport & Storage
675 claims at a value of £30m
Accommodation & Food
635 claims at a value of £15m
Information & Communication
17,230 claims at a value of £1,145m
Financial & Insurance
1,200 claims at a value of £115m
Real Estate
430 claims at a value of £15m
Professional, Scientific & Technical
14,490 claims at a value of £1,130m
Admin & Support Services
4,615 claims at a value of £240m
Public Administration, Defence & Social Services
10 claims at a value of <£10m
Education
835 claims at a value of £30m
Health & Social Work
1,160 claims at a value of £45m
Arts, Entertainment & Recreation
965 claims at a value of £75m
The average SME claim remains at circa £57,000
The fact that the average claim value remains roughly the same despite the fact that the number of SME claims have increased indicates that smaller SMEs and early start ups are taking advantage of the relief. It could also be that SMEs from non traditional R&D enriched sectors with smaller sized projects are now understanding their eligibility and making successful claims. Even though claim values for these companies are smaller than larger SMEs, the impact on the benefit could be vital the company’s business.
The cash benefit band of 'up to £5' remains the largest
The cash benefit band ‘up to £5k’ contains the largest number of SME claims, a band which would contain a large number of start up companies. This is closely followed by ‘£50k – £100k’ and then ‘£5k – £10k’ . This three tiered leader board has slightly shifted from the statistics in the 2018-19 report, seeing the ‘£50k – £100k’ banding overtaking the number of claims made in the ‘£5k – £10k’ band.
RDEC claims submitted by SMEs continue to grow
Another upward trend is the number of RDEC claims submitted by SMEs. There are a number of reasons why an SME makes a claim under the RDEC rules, including grant funding and subcontracted-in R&D activities.
This is potentially a good sign, as it indicates that more and more SMEs understand that the receipt of grant funding does not prevent them from making an R&D tax relief claim. However, SMEs need to ensure that they have taken the correct professional advice, as some may be claiming under RDEC when they could be entitled to the more generous SME relief, missing out on thousands of pounds.
R&D claims are concentrated in London or the South East of England
This statistics show a concentration of claims by companies with registered offices in London (20% of total claims and 31% of total amount claimed), the South East (15% of total claims and 18% of total amount claimed).
The East of England has the third largest amount claimed with 11% 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 fifth largest region based on the amount claimed. The proportions of claims and amount claimed by region are similar to those seen in recent years.
This is no surprise however we do need to keep in mind that the regional split is based on the registered head office location so may not be where all the R&D activity takes place.
Matthew Jones
Managing Director, LimestoneGrey
“The statistics produced by HMRC provide a good base point to study the usage of R&D tax credits and it is pleasing to see the number of companies taking advantage of the relief increase year on year.
The lack of context behind the numbers means that industry professionals need to develop their own meaningful conclusions based on their knowledge and experience as to why trends are happening.
It is good to see that more and more companies are taking advantage of the relief. However, future reports may not be as promising. The latest statistics report will be the last that is untainted by the impact of COVID-19. One of the cost categories claimable is cost of employees, which from March 2020 for many companies, the value of this cost will be negatively impacted by the furlough scheme.
It has been no secret that HMRC have put a variety of measures in place to ensure the professionalism and integrity of the industry and may stunt the growth of the number of claims accepted as HMRC crackdown on claims that are ineligible.”
Due to the nature of the scheme, returns for the latest financial year reported (2019-20) can still be submitted past the cut-off date for the publication. As a result, data for 2019-20 is not yet complete. To avoid misleading comparisons between years, the 2018-19 figures have been taken directly from the 2020 HMRC statistics report to make a true comparison.
*Industry sector is based on primary SIC2007 coding of registered company and might not correspond to the industry sector of the R&D activity.
Speak to our team
Do you have questions on your eligibility or would like to discuss how LimestoneGrey can support you with your R&D tax credit claim? Contact us to speak to one of our experienced tax advisors.
