Key Insights from HMRC's 2024 R&D Tax Credit Statistics Report
The HMRC R&D Tax Credit Statistics Report provides an annual overview of the trends and performance of R&D tax reliefs in the UK, highlighting the impact of innovation investment across different sectors and different parts of the UK. The 2024 report covers the tax year 2022-2023, offering valuable insights into R&D expenditure, the number of claims and the average claim value. In this article, we’ll break down the key statistics from the report and discuss what they mean for businesses and the UK economy.
R&D Tax Credit Report: Key Statistics
Total number of claims
A decrease of 21% from the previous year
Average claim value
Increased by 28%
Total R&D expenditure
An increase of 4%
What Does This Mean?
The increase in R&D expenditure indicates a positive outlook, with more businesses investing in innovation, which is great news for the UK economy.
Despite the drop in the total number of claims, the higher average claim value suggests that businesses making claims are investing in larger, more ambitious R&D projects. The decline in the number of claims may also reflect HMRC’s ongoing efforts to combat fraud, with the biggest reduction coming from smaller claims and sectors that are less likely to be eligible for R&D tax relief. This aligns with HMRC’s goal of ensuring that only those who qualify are claiming.
Number of R&D tax credit claims
For the tax year 2022 to 2023, the total number of R&D claims is estimated to be 65,690, a decrease of 21% from the previous year. This breaks down into 55,325 claims under the SME scheme and 10,365 claims under the RDEC scheme.
The number of SME scheme claims includes 23,805 for a deduction from CT liability and 31,520 for a payable tax credit. This represents a 23% decline in SME claims compared to last year.
In the RDEC scheme, 3,675 claims were from large companies, and 6,690 claims were from SMEs, a 9% decrease overall.
The introduction of the Additional Information Form (AIF), mandatory from August 2023, may have contributed to this decrease as the form requires more detailed information to support claims.
Amount of R&D tax relief claimed
The total R&D tax relief claimed in 2022 to 2023 is estimated at £7.5 billion, up 1% from the previous year. This is split into £4.5 billion under the SME scheme and £3 billion under the RDEC scheme.
While the total support claimed under the SME scheme has decreased by 3%, claims under the RDEC scheme have increased by 7%, continuing the trend of recent years.
Sector and regional distribution
London continues to dominate, accounting for 23% of total claims and 32% of the total amount claimed, followed by the South East. However, these figures represent the registered office locations and may not necessarily reflect where the R&D activities are actually carried out.
The Information & Communication, Manufacturing, and Professional, Scientific & Technical sectors remain the top three contributors, representing circa 66% of total claims and circa 70% of the total amount claimed.
Changes in R&D tax credit claim size
One notable trend is the 28% increase in average claim value, despite the reduction in claim volume. This can be explained by a significant drop in smaller claims (under £15,000) and an increase in larger claims (over £250,000). This shift suggests that the R&D tax relief schemes are becoming more accessible to companies investing in larger, high-value projects.
Cost band analysis
There is a concentration of claims in the lower cost bands, with 64% of claims falling under £50,000, largely driven by the SME scheme. This proportion has fallen by 5% from the previous year, in line with the overall reduction in smaller claims.
Decrease in first-time applicants
A concerning trend is the third consecutive year of decline in first-time applicants, reflecting a potential drop in start-ups engaging with the R&D relief schemes. It is vital that businesses, especially new innovators, seek specialist advice early in their journey to maximise their benefits.
Looking ahead: What’s next for R&D Tax Credits?
At the 2022 Autumn Statement, significant changes to R&D relief rates were announced, with effects starting from April 2023. These include a reduction in the SME enhancement rate to 86% and the SME credit rate to 10%, while the RDEC rate increased to 20%. An alternative scheme for R&D intensive SMEs was also introduced, keeping the 14.5% credit rate for those with at least 40% of expenditure going into R&D.
Looking forward to April 2024, a new single expenditure credit scheme will replace the two existing reliefs, with an alternative scheme specifically for R&D intensive SMEs. The full impact of these changes will be reflected in HMRC’s future statistics, with more detailed information expected in the 2025 and 2026 reports.
We’re eagerly awaiting the upcoming budget later this month, which could bring further changes to R&D tax credits and the wider landscape of innovation funding. As businesses continue to navigate evolving legislation, it’s important to stay informed about potential updates that could impact your claims and overall R&D strategy. We’ll be watching closely to see if any new measures will shape the future of R&D investment in the UK.
Matthew Jones, managing director, LimestoneGrey, commented:
Matthew Jones
Managing Director
The 2024 HMRC R&D Tax Credit Statistics Report shows that despite a decrease in claim numbers, R&D investment in the UK is rising, and the schemes are becoming more targeted towards genuine innovation.
The additional scrutiny introduced by HMRC seems to be working, ensuring that claims are both legitimate and impactful. However, it is vital that genuine companies are not caught in the crossfire and that barriers are not created for start ups.
As we move forward with further reforms, businesses should continue to engage with R&D tax specialists to navigate the evolving landscape and maximise their potential benefits.
Note: The figures in this report reflect R&D relief rates prior to the 2023 reforms, but some impacts of administrative changes are already visible.
Speak to our Qualified Advisors
For further information on the report statistics, or for assistance with your company’s R&D tax credit claim. contact us to speak to one of the team.
