The United Kingdom's commitment to fostering innovation and research and development (R&D) is evident in the latest figures released for the tax year 2021 to 2022. The provisional estimates indicate a robust increase in both the total amount of R&D tax relief support claimed and the number of R&D tax credit claims. Let's delve into the key highlights that reflect the nation's dedication to advancing technological and scientific endeavours.
Substantial Increase in R&D Tax Relief Support:
The provisional estimated amount of total R&D tax relief support claimed for the tax year 2021 to 2022 stands impressively at £7.6 billion. This marks an 11% increase from the previous year, showcasing the growing emphasis on incentivising companies to invest in groundbreaking research and development activities.
Surge in R&D Expenditure:
Corresponding to the increased support, the provisional estimate of R&D expenditure reached £44.1 billion, reflecting an 8% rise from the previous year. This upswing underlines a positive trend in the commitment of businesses across various sectors to allocate resources for innovation and technological advancements.
Rising Number of R&D Tax Credit Claims:
The provisional estimated total number of R&D tax credit claims for the tax year 2021 to 2022 saw a 5% increase from the previous year, totalling 90,315. This rise is attributed to a notable increase in claims across both the SME and RDEC schemes, affirming the broad participation of companies in the pursuit of R&D tax incentives.
Average Value of Claims on the Rise:
A fascinating trend emerges when we analyse the average value of R&D tax relief claims. The data indicates a 6% increase in the average value of claims in 2021 to 2022. This is primarily driven by a substantial 9% increase in the SME scheme, possibly reflecting a recovery from the disruptions caused by the COVID-19 pandemic in the preceding tax year.
Geographical Concentration of Claims:
Notably, there is a concentration of claims by companies with registered offices in London (22% of total claims and 32% of the total amount claimed) and the South East (15% of total claims and 18% of the total amount claimed). It is important to recognise that the registered office location may not necessarily align with the location of all R&D activities undertaken by these companies.
Sectoral Dominance in R&D Claims:
The Information & Communication, Manufacturing, and Professional, Scientific & Technical sectors continued to dominate R&D claims, contributing to 62% of the total claims and 67% of the total amount claimed for the tax year 2021 to 2022. This underscores the pivotal role played by these sectors in driving innovation and technological advancements.
Conclusion:
The upward trajectory in R&D tax relief support and the increasing number of claims signify a positive landscape for innovation in the UK. As companies, particularly in key sectors, continue to invest in research and development, the nation is poised for sustained growth and technological leadership. These encouraging figures underscore the importance of R&D tax incentives in fostering a culture of innovation and competitiveness in the global landscape.
Although the statistics paint an optimistic picture of what the future looks like for R&D tax relief, it is important to understand that all businesses submitting R&D claims now face more scrutiny. With the recent introduction of the additional information form and the forthcoming pre notification requirement, HMRC are taking steps to prevent fraudulent or non-compliant claims from being accepted. Unfortunately, a symptom of this is the regular opening of enquiries which, some believe, has led to the rejection of legitimate claims. Only time will tell if this approach has been successful in eradicating the less compliant agents and rewarding the companies that are legitimately carrying out R&D projects.
