HMRC's R&D Tax Credits Report: What The Numbers Say And What They Actually Mean

The latest statistics coming in from HMRC are short on big surprises, but what’s there makes for encouraging reading overall. More innovative companies than ever are claiming R&D Tax Credits, which is good news for everyone. On the other hand, a lot of them are probably still claiming much less than they should be.

Between a change in the way HMRC makes its calculations and the fact that Company Tax Returns for 2016-17 are still being filed, some of the most recent stats are provisional. However, looking back as far as 2014-15 paints a much clearer picture of where we are - and where we’re heading. Here are some of the key points:

Total claims made under the R&D scheme in 2015-16: 43,040

That figure’s pretty impressive, showing a 22% rise over the previous tax year. Looking at the SME scheme over the same period, the number of claims is up by 23% to 36,280.

Total value of claims in 2015-16: £3.7 billion

Another encouraging figure, showing that things are definitely heading in the right direction. The amount being claimed is actually a full 25% higher than it was in 2014-15.

London and the South East are still the UK’s biggest R&D hot-spots

Not a surprise, exactly, but worth looking at a little more closely. So far in the 2016-17 figures, London and the South East of England have accounted for 45% of all R&D claims. What’s more, they’ve actually received a full 60% of the total pay-outs. Again, some of the numbers for 2016-17 are still provisional, but there’s a clear pattern– which leads us on to…

Who is claiming? The top sectors for R&D claims are starting to look pretty familiar:

• Manufacturing
• Professional, Scientific and Technical
• Information and Communication

All told, these 3 categories made up 71% of all R&D claims, and were granted 75% of the total amount claimed. To put that in perspective, 2016-17 has so far seen 34,060 claims made under the SME scheme, with £3.5 billion in tax relief claimed.

Many SMEs are still missing out

The average claim size so far in the 2016-17 statistics is a little under £54,000 for SME firms. However, 75% of all SME claims are worth under £50,000.

Since the scheme first launched, over 240,000 claims have been filed, for a massive tax relief total of £21.4 billion. The outlook is still pretty positive overall, with a gradual year-on-year increase in the number of companies claiming. More SMEs than ever are waking up to the rewards of innovation, but the vast majority of them are making relatively low-value claims., Add to this the sectors that aren’t claiming, and there are definite signs that SMEs aren’t making the most of what’s available. With an uncertain Brexit still looming, what is in store for the future of R&D Tax Credits?

 R&D Tax Credits sit right at the heart of the UK government’s Industrial Strategy – and their importance is only going to grow if and when our departure from the European Union jeopardises our access to  European grants. Every £1 awarded to an innovative firm under the R&D scheme stimulates between £1.52 and £2.35 in investment. After Brexit, it’s entirely possible that the rules of the R&D game will change, but the concern right now is that SMEs in particular are missing out because they don’t have the in-depth tax knowledge they need.

An R&D Tax Credits claim can be a complex project and, like so much else in the tax world, it really does take an expert eye to make the most of it. RIFT’s technical specialists work closely alongside yours for exactly this reason. We’ll track down all your qualifying projects and expenditure, and stick with you until your tax relief is paid.

That’s the RIFT Resolution: credit where credit’s due.

Get credit for your business innovation with research and development tax credits claim assistance from RIFT. Find out more about types of HMRC R&D tax credits, deep dive into the world of business innovation with our insights, or contact RIFT R&D today to find out how we can maximise your benefits.