New HMRC R&D tax credit statistics released
What is the R&D tax credit statistic report?
HM Revenue and Customs (HMRC) have released their latest Research and Development (R&D) Tax Credits Statistics Report; sharing data for accounting periods ending during the 2018-19 tax year. The report, published each year, provides valuable information on the number of UK companies benefiting from the relief and the value of the cash benefits secured.
LimestoneGrey has analysed the data to uncover the key R&D tax credit trends, assessing to what extent UK companies are utilising this valuable government incentive.
R&D tax credit statistics: key facts
Since its inception in 2000, over 300,000 R&D tax credit claims have been submitted to HMRC with companies successfully recovering over £33.3bn in tax relief over this period.
R&D tax credit claims submitted
R&D tax credit claimed
The latest report has highlighted the following key facts for 2018-19.
R&D tax credit claims
SME claims as a percentage of all claims
Total R&D tax credits relief claimed
The number of claims submitted have increased by 22% from 2017-18, leading also to an increase in the total R&D tax credit relief claimed.
The key trends identified
The ‘Manufacturing’, ‘Professional, Scientific and Technical’, and ‘Information and Communication’ sectors continue to have the greatest volume of claims, making up a total of 66% of claims and 71% of the total amount claimed for 2018-19.
This is by no means a surprise as these industries lend themselves to research and development activities. However, R&D tax credits are available to all business sectors. A breakdown of sectors that made claims in 2018-19, along with the total number of claims, can be found below:
|Agriculture, Forestry, Fishing: 620|
|Mining & Quarrying: 105|
|Electricity, Gas, Steam and Air Conditioning: 160|
|Water, Sewerage and Waste: 355|
|Wholesale & Retail Trade, Repairs: 6,695|
|Transport & Storage: 540|
|Accommodation & Food: 360|
|Information & Communication: 13,420|
|Financial & Insurance: 1,100|
|Real Estate: 265|
|Professional, Scientific & Technical: 11,570|
|Admin & Support Services: 3,440|
|Public Administration, Defence & Social Services: <5|
|Health & Social Work: 785|
|Arts, Entertainment & Recreation: 685|
Agriculture, Forestry and fishing and construction sectors have seen noticeable uplifts, with claims increasing year on year by 61% and 65% respectively.
There has been 10,200 first time applicants for R&D tax credits in 2018-19, an increase of 21% from the previous year.
87% of these first time applicants were SME companies.
R&D claims are concentrated in companies with a registered office in London, the South East or the East of England (45% of all claims and 60% of the total amount claimed for 2018-19).
Again, this is no surprise however we do need to keep in mind that the regional split is based on the registered head office location so may not be where all the R&D activity takes place.
All areas have seen an uplift in claims or have stayed consistent.
Wales and West Midlands and Scotland have seen their number of claims increase, with rises of 31%, 32% and 32% respectively.
The average SME claim has increased to £57,000.
The cash benefit band ‘up to £5k’ contains the largest number of SME claims, a band which would contain a large number of start up companies. This is closely followed by ‘£5k – £10k’ and then ‘£50k – £100k’. This three tiered leader board is mirrored in the statistics from 2017-18.
Another upward trend is the number of RDEC claims submitted by SMEs. There are a number of reasons why an SME makes a claim under the RDEC rules, including:
- Grant funding
- Subcontracted-in R&D activities on behalf of a large company, university or charity
This is potentially a good sign, as it indicates that more and more SMEs understand that the receipt of grant funding does not prevent them from making an R&D tax relief claim. However, SMEs need to ensure that they have taken the correct professional advice, as some may be claiming under RDEC when they could be entitled to the more generous SME relief, missing out on thousands of pounds.
The band that houses the highest number of large company claims remains at £100k – £250k.
The statistics produced by HMRC provide a good base point to study the usage of R&D tax credits and it is pleasing to see the number of companies taking advantage of the relief increase year on year.
The lack of context behind the numbers means that industry professionals need to develop meaningful conclusions based on their knowledge and experience as to why trends are happening.
Due to the nature of the scheme, returns for the latest financial year reported (2018-19) can still be submitted past the cut-off date for the publication. As a result, data for 2018-19 is not yet complete. To avoid misleading comparisons between years, the 2017-18 figures have been taken directly from the 2019 HMRC statistics report to make a true comparison.
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