According to HMRC, here’s an overview of the R&D Tax Credit statistics for the 2023-2024 tax year:
- Estimated Total R&D Tax Relief Claimed
- £7.6 billion, reflecting a 2% decrease from the previous year.
- Tax Relief Claimed Through the SME Scheme and RDEC
- Total relief under the SME scheme decreased by 29% to £3.15 billion.
- On the other hand, relief claimed under the RDEC scheme rose by 36%, reaching £4.41 billion.
- Total Number of R&D Tax Credit Claims
- 46,950 claims in total, down by 26% compared to the previous year.
- 36,885 claims under the SME scheme.
- 10,065 claims under the RDEC scheme.
- Both SME and RDEC schemes saw a reduction in claims.
- Impact on the SME Scheme
The number of claims for the SME scheme dropped by 31%. While the RDEC scheme saw a smaller decline of 5%. - Changes in Claim Value
- There’s been a notable decrease in claims under £15,000, while claims over £250,000 have increased.
- This shift resulted in a 33% rise in the average value of claims, despite a significant drop in the number of claims. The overall cost has grown slightly as a result.
- Sector Breakdown
- The Information & Communication (26%), Manufacturing (26%), and Professional, Scientific & Technical (19%) sectors continued to dominate, making up 72% of total claims and 71% of the total amount claimed for 2023-2024.
- Decline in First-Time Applicants
- First-time applicants dropped by 41%, marking the fourth consecutive year of decline in this category.
Insights
HMRC stated a few years ago that they felt up to 50% of all SME R&D Tax Credit claims were in error.
In the 2020-2021 period the volume of SME R&D tax credit claims filed was over 75,000. In 2023-2024 this amount is now 36,885.
It appears that through increased compliance checks, the requirement to file additional information and substantially reducing the R&D tax credit for SME’s that HMRC is achieving its goal to reduce claims filed error.
The 2023-2024 period is the first year where we see the impact of the substantially reduced R&D tax credit rates for the SME program.
We expect this trend of decreasing SME R&D Tax Credit filings to continue to the next period as the new merged RDEC scheme came into effect for accounting periods commencing after 1 April 2024.
While RDP agrees that there were far too many R&D Tax Credit claims filed by SMEs in the past that were in error, there comes a point where one must ask if the SME scheme is offering SME’s enough of an incentive.
The R&D Tax Credit rates for Ireland, the Netherlands, Germany and France are all over 30%. With the exception of R&D intensive SMEs in a tax loss position the current R&D Tax Credit rate under the new merged RDEC scheme in the UK is between 15%-16.2% roughly half what neighbouring countries are offering.
What message is the government sending to the SME community in terms of its R&D efforts?
How can RDP help with your R&D Tax Credit claim?
Assessing an eligible R&D project is not a straightforward task.
RDP has assisted in filing over 10,000 R&D Tax Credit claims for the past 35 years.
Our technical team of software specialists, engineers and technology professionals have the academic and industry experience to identify eligible R&D projects and prepare the necessary information that meets HMRC requirements.
RDP can assist in assessing if the company is eligible to make an R&D Tax Credit claim at no charge. This typically occurs over a short 20 to 30-minute call with the company.
If you and / your clients are interested in our free assessment or want to know more about how to make an R&D Tax Credit claim or obtain more of our thoughts regarding the most recent statistics. Please contact Jenni at [email protected]