R&D tax relief claims increase by 11%
The Government launched R&D tax credits in 2,000 in order to encourage innovation by UK businesses by providing a tax relief which would lead to greater R&D investment. They work by either reducing your corporation tax bill or through a cash benefit.
There have been a raft of legislation changes in the last year or so due to HMRC trying to tackle fraudulent claims. The Government have published their annual R&D tax credit statistics outlining the key trends in the 2021-2022 tax year period.
The most important headline was the increase in R&D tax relief support claimed rising by 11% (7.6bn in total). There were 90,315 claims made in the 2021-2022 tax year which had increased by 5% from the previous year, there was an increase in both the SME and RDEC schemes.
The average SME claim saw a 6% increase and the claims were concentrated with businesses holding registered offices in London (22%). The most popular industries making a claim were the information and communication, manufacturing and professional and scientific and technical. They make up 62% of the total claims for the 2021-2022 tax year.
Looking at the total amount of support claimed, £4.8bn was claimed through the SME scheme and £2.8bn via the RDEC scheme. The volume of claims under the SME scheme is much larger than under the RDEC scheme however the average claim size is much smaller in comparison to the RDEC scheme.
Qualifying R&D expenditure has also seen an increase of 8% compared to the previous tax year, most of this was by businesses claiming under the RDEC scheme.
The increase in claims may be due to recovery from the pandemic which had restricted some businesses in carrying out any R&D activities due to lockdown, this can also be seen by the fact that there was no growth in claims in 2020-2021 (during the Covid years). There have been a number of key changes announced this year and we are yet to see the impact of these on the number of claims.
Jon Goodier, R&D Director said “the increases in the 2021-2022 tax year R&D tax credit claims is positive and we are not surprised by the sectors which have posted the most claims. The R&D tax relief is a fantastic scheme for businesses who are developing or modifying a product, process of service to claim for funds to develop their business even further.”