HRMC recently released its latest R&D tax credit statistics, including all the applications submitted up to the year ending March 2020 under the Small and Medium Enterprise (SME) and large company (RDEC) incentives. The information included in the report offers an overview of the progress of the Government plan to reinforce the UK leadership in research and the innovation of the country’s economy and highlights opportunities for companies that haven’t benefited from the incentive yet.
COVID-19 has certainly slowed down the process and it will be necessary to wait for the following HMRC publication to evaluate the real impact of the pandemic on the R&D numbers.
However, the Government is confident in considering R&D as the key to reinventing many businesses in response to the COVID-19 crisis by embracing science and progress to build a brighter future for the nation.
The following table highlights some of the key points emerging from the report:
R&D tax credit relief overview
The total number of R&D applications for the year ending March 2020 is estimated to reach 85,900, registering an increase of 16% from the previous year. The numbers are expected to increase due to the retrospective nature of the incentive, which will enable companies to make an application for the year ending March 2020 until March 2022.
SME applications account for almost 89% of the total with an annual growth of 16%, reinforcing their role as the main drivers of general growth in applications submitted. A further breakdown of the SMEs numbers indicates that 38,050 claims are purely for a Corporation Tax liability deduction, whereas 38,175 include a payable tax credit.
Under the RDEC incentive, 4,370 large companies benefit from the relief and a further 5,305 SMEs qualified for the RDEC scheme as subcontractors.
Overall, the RDEC scheme has seen a growth of 12% compared to the previous year.
Number of claims for R&D tax credits by scheme, 2014-15 to 2019-20
Map of the R&D applications submitted by region
Despite the presence of numerous innovative companies, many regions show a low number of submitted applications, meaning that there is still a lack of awareness in these areas. On the contrary, companies in Greater London seem to be familiar with the R&D tax relief showing the highest number of applications submitted in the country, over 17,000 (20% of the total number) and around £2.3 million claimed (30% of the total amount). The Southeast shows the second-highest number of applications submitted (11% of the total), whereas the North East (slightly over 3% of the total) highlights an area that may not be fully benefitting from the scheme in comparison to the rest of the country.
Number of R&D tax credit claims by region of company registered address, 2019-20
R&D total amount claimed by sector
From the figure below there is no surprise in seeing the Information and Communication, Manufacturing and Professional, Scientific and Technical sectors showing the highest amount of R&D tax credit relief claimed. However, this should not discourage other sectors to explore the incentive. Based on our experiences, many companies miss the opportunity to recover the money invested in innovative projects because they misunderstand the concept of R&D, strictly associating it with white coats and scientific departments, while instead, the definition provided by HRMC is much broader than that.
Amount of R&D tax credits claimed by industry sector, 2019-20 (£ million)
Overall, the trend of growing investment in R&D remains uninterrupted despite the impact of the pandemic. The latest figures shine an optimistic light on the possibility of achieving the Government’s goal of reaching a total R&D expenditure of 2.4% of GDP by 2027. In this context SME’s play a key role, which is confirmed once again by the number of first applications submitted.
Number of first time applications by scheme, 2014-15 to 2018-19
If your company have recently had to overcome uncertainty in the attempt to develop a novel solution in the field, you are most likely eligible for the R&D tax credit relief.
As highlighted by the figures, many sectors are not taking full advantage of the incentive. Agricultural businesses for example, as well as many others, are constantly evolving and developing innovative solutions to enhance their competitiveness, the cost of which can be recovered!
Furthermore, the increasing number of applications submitted by SMEs will hopefully incentivise others to pursue the substantial cash injection for their businesses.
If you’re still unsure about the eligibility of your activities, get in touch with one member of our team of experts.
Apogee offers an initial, free-of-charge consultation with no further commitment. Our mission is to promote innovation and sustainability within the UK businesses and help them reach their Apogee!
If you would like an expert team who are committed to sustainability to compile your R&D application, fill in the form below and one of us will be in touch!