On 30 September 2020 HMRC published the statistics for claims for research and development (R&D) tax relief in the UK.
By monitoring tax relief schemes HMRC can examine the level of use of the schemes and gain some insight into the effectiveness of the tax relief in achieving the targeted taxpayer behaviour. The statistics gathered on the schemes are therefore important for the process of establishing any changes needed to better target the schemes and align them more closely with the intended outcomes.
The R&D tax relief is intended to encourage more expenditure on R&D in the UK leading to greater investment in innovation. There are three schemes for R&D tax relief that give relief either by reducing a company’s liability to corporation tax or by making a tax refund. The three schemes are the small or medium-sized enterprise (SME) Scheme; the large company scheme; and research and development expenditure credits (RDEC).
SMEs are given a higher rate of relief than larger companies and they may claim a cash payment if they do not have a tax liability in a period against which they can offset relief.
R&D Tax Relief for 2017/18
In 2017/18 the total number of claims for R&D tax credits rose to 62,095, an increase of 17% from the previous year. The increase was primarily driven by a rise in the number of SME claims, totalling 54,005 in 2017/18, which was an increase of 19% from the previous year.
The total amount of R&D relief claimed increased to GBP 5.1 billion in 2017/18, an increase of 15% from the previous year. The total value of R&D expenditure which formed the basis of claims for tax relief was GBP 36.5 billion in 2017/18, an increase of 8% from the previous year.
The greatest volume of claims were made by the manufacturing sector, professional, scientific and technical sector and the information and communication sector.
There were 15,750 first time applicants for R&D tax credits in 2017/18, an increase of 10% from the previous year. This increase is largely driven by SME companies.
R&D Tax Relief for 2018/19
As at 30 June 2020 there had been 59,265 R&D tax credit claims for 2018/19, of which 52,160 were made through the SME R&D scheme. The figures are expected to increase as more returns are received. R&D tax relief claims from the manufacturing sector, professional, scientific and technical sector and the information and communication sector accounted for 66% of claims made and 71% of the total amount of relief claimed for 2018/19.
As of 30 June 2020, GBP 5.3 billion of R&D tax relief support had been claimed for 2018/19, corresponding to GBP 35.3 billion of R&D expenditure.
Between 2000/01, when the R&D tax credit schemes were launched, and 2018/19, more 300,000 claims for relief have been made and GBP 33.3 billion in tax relief has been claimed.
