HMRC R&D Tax Credit Statistics Report: What is it and why is it needed?
The latest Research and Development (R&D) Tax Credits Statistics Report has been released by HM Revenue and Customs (HMRC), proving information for accounting periods ending during the 2020-2021 tax year. The report, published annually, aims to share insight into the number of UK companies benefitting from the relief and how much they are claiming, allowing us to make comparisons and assess any trends.
LimestoneGrey has analysed the data to uncover the key information, evaluating to what extent UK companies are utilising this valuable government incentive.
R&D Tax Credit Report: Key Figures
Total number of claims
Total amount of R&D support received
Total R&D expenditure
R&D Tax Credit Report: Key Findings
Continued rise in the number of claims submitted
The provisional number of R&D tax credit claims submitted was 89,300, a rise of 7% from last year. This is attributed to an increase in the number of claims submitted by small or medium-sized enterprises making claims submitted under the SME relief and Research and Development Expenditure Credit (RDEC) scheme.
Decrease in R&D support claimed
The estimated amount of Research and Development (R&D) tax relief support claimed was £6.6 billion, a decrease of 4% from the previous year. This is largely due to a decrease of 13% in total support claimed through the RDEC scheme. The £6.6 billion is made up 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.
Reduction in R&D expenditure
An estimated £38.1 billion was spent on qualifying research and development activity, a decrease in 11% on the previous year. 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. The furlough scheme may have contributed to this decrease. Payroll is one of the cost categories that can be claimed in a submission, but if employees were absent from the business and placed on furlough, their wage could not be accounted for.
Average claim value drops
A buck in the trend of recent years, this report sees the average claim values reduce, with the average SME claim now standing at £53,663 and an RDEC claim producing an average claim value of £225,298. The average claim value per sector can be found on our sector page.
Concentration of claims in particular locations
As in previous years, 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). These areas generally have the highest concentration of businesses and would potentially have more access to investment opportunities so naturally will have a higher level of activity. However, we do need to be mindful of the fact that this data is based on a company’s registered address and this location may not be where actual R&D activity is undertaken.
Selection of sectors benefiting from the relief
The Information and Communication, Manufacturing, and Professional, Scientific and Technical sectors continued to have the highest volume of claims, making up 62% of total claims and 70% of the total amount claimed. These R&D-rich sectors have research and development activity embedded within their culture and would naturally be less inclined to put activity on hold as it is, in parts, vital to their organisation.
Figures tainted by impact of COVID-19
This latest report is the first that contains data taken from a tax year that was disrupted by COVID. The impact that COVID had on company research and development is made clear in the reduction of R&D expenditure. The uncertainty of the business landscape forced many business plans to change and the furlough scheme may have created gaps in knowledge and expertise within the company for a substantial period of time.
Matthew Jones, managing director, LimestoneGrey, commented:
‘It is no surprise that figures in this report have been affected by the pressures COVID placed on many companies. This tax year spans the first wave of COVID restrictions and the high uncertainty that followed.
The lack of context behind the numbers means that we need to develop our own conclusions so it is difficult to say if COVID-19 is the sole factor in the reduction in expenditure and support received.’