The Government launched R&D tax credits in 2000 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. The Government have published their annual R&D tax credit statistics outlining the key trends in the 2022-2023 tax year period.
The most important headline was the increase in R&D tax relief support claimed rising by only 1% (7.5bn in total). There were 65,690 claims made in the 2022-2023 tax year which saw a decrease of 21% compared to the previous year.
The SME scheme saw a 3% drop in the amount of tax relief being claimed. In contrast the RDEC scheme experienced a 7% increase. Claims were concentrated with businesses holdng registered offices in London (23%). The most popular sectors making a claim were the information and communication, manufacturing and professional, scientific, and technical. They make up 67% of the total claims for the 2022-2023 tax year.
Looking at the total amount of support claimed, £4.5bn was claimed through the SME scheme and £2.5bn via the RDEC scheme and £545m was claimed by small and medium sized businesses. 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.
The amount of claims has seen less of an increase compared to previous years, this reflects the outcome of the measures put in place by HMRC to combat error and fraud which seem to be working. There has been a decrease in the number of claims with smaller claims seeing the largest fall.
Jon Goodier, R&D Director said “The 2022 to 2023 financial year experienced a huge change in the the administrative process of R&D claims. HMRC focused more on compliance which we have experienced at Xeinadin R&D with claims taking longer to process and more stringent checks in place. This has been reflected in the statistics with the lower value claims decreasing. Although it could be seen that a decrease in claims is a negative outcome, we agreed that there was an issue that needed addressing.”
