HM Revenue and Customs Research and Development Tax Credits Statistics 2023: Key Findings

What Do HM Revenue and Customs’ 2023 Research and Development Tax Credits Statistics Tell Us?

HM Revenue and Customs’ (HMRC’s) Research and Development Tax Credits Statistics: September 2023, for the financial year 2021-22, were released on 28 September 2023, presenting detailed information on the provisional estimated amount of research and development (R&D) tax relief claimed for across all sectors and regions during the tax year.

Key Findings

Average Claim Increase

The average claim in 2021-22 was £85,843, compared to the previous year’s average of £74,000. This represents a 6% increase in the average value of claims (9% of which were driven by the small and medium-sized enterprise (SME) scheme, compared to 2020-21.

11% More Tax Relief Claimed

The total value of R&D tax relief claimed increased by an impressive 11% to reach £7.6 billion, compared to last year’s total of £6.8 billion.

Top Sectors

The Information and Communication, Manufacturing and Professional, and Scientific and Technical sectors have continued to have the greatest volume of claims, making up 62% of total claims and 67% of the total amount claimed for the tax year 2021-22.

8% More R&D Expenditure

Total R&D expenditure rose to £44.1 billion in 2021-22 from £38.1 billion in the previous year.

London Remains Claims Hotspot

Companies in London accounted for 22% of total claims and 32% of total amount claimed, followed by the South East (15% of total claims and 18% of total amount claimed).

5% More Claims

In 2021-22, there were a total of 90,315 claims, which is a 5% increase from the previous year. Claims increased across both the SME and R&D expenditure credit (RDEC) schemes.

Ryan’s Expert Opinion

Whilst the number of R&D tax relief claimants has, once again, risen, the number of first-time claimants continues to fall. The challenges faced with R&D tax relief claims with the extra compliance and the approaches taken by HMRC denying claims, by using Google searches and not engaging with the claimant company to understand the projects, are having a detrimental impact on the relief. It is ironic that HMRC measures R&D claims by SIC code, admitting SIC code is not a realistic method, yet it targets its compliance checks using this exact method.

There are concerns that the relief is now being steered mainly towards larger corporations, and the backbone of the UK economy, the SME companies, will stop undertaking R&D due to the harsh treatment they are receiving from HMRC and the loss in the value of the relief.

Nigel Holmes, Director, Research and Development, Ryan