Tax Update: R & D Tax Credit Claims on the up

Published: Friday 25 October 2019

HMRC has released their national Research and Development (R&D) tax credit statistics, providing information on the nature of the companies claiming them and the amount of tax credits claimed in 2016/17.

We have included a few highlights from the report below focusing on  headline figures, industry sectors, first time applications and location.   

Headline figures

The total number of claims for R&D tax credits rose to 52,335 in 2016/17, an increase of 20% from 2015-16.  HMRC have cited this as being primarily driven by an increase in the overall number of SME claims made, which totalled 45,045 in 2016-17, up 22% on the prior year.

The total amount of R&D support claimed was up 14% to £4.4 billion, with a total of £32.8 billion of qualifying expenditure identified in claims made. 

Industry sector analysis

Sector wise, it was no surprise to see the types of company claiming the most, with manufacturing, professional, scientific and technical, and information and communication, making up a total of 68% of the claims and 73% of the total claimed for those filed to date in 2017/18.

‘Manufacturing’, as usual had the highest percentage of claims with 25%, followed closely by 'Information and Communication' (24%) and 'Professional, Scientific and Technical' (20%).  

First time applicants

The number of first-time applicants in the SME scheme rose by 15% in 2016/17 with 12,120 new applicants during this time. This was put down to the enhanced expenditure and payable tax credit rates making the SME scheme more generous. 

It will be interesting to see what impact the proposed reintroduction of a ‘cap’ on payable credits linked to PAYE and National Insurance will have on the number of SME claims going forward.  This has been the subject of recent consultation, the results of which are due to be published around the time of the next Budget.

Improved data sourcing was also part of the reason behind the increase of first time SME and large company applications year on year. 

Location of tax credit claims

No surprises arose when discussing the location of credit claims showing London generating 20% of claims. The South East (16%) and East of England (10%) followed closely behind.

David Clift, Partner and Head of Innovation Taxes at Hazlewoods commented “It is encouraging to see that the overall number of R&D claims continues to grow.  This build-up in the number of claims could also explain the recent delays of up to nine months in processing claims, although we are pleased to see that HMRC have now succeeded in clearing this backlog."

“The usual industry sectors continue to make up the large majority of claims, but it is still important to note that a company in any sector can potentially qualify for relief if the company meets the qualifying criteria.  Also, the data relating to the location of claims could be skewed slightly as this is based on the registered office rather than necessarily where the R&D is being carried out." 

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David Clift
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Jemma Vaughan
Jemma Vaughan
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