HMRC have published the latest set of annual statistics on R&D tax relief claims (external PDF), indicating a rise of almost 9% overall in the number of claims (9.6% rise for SME claims, 5.5% for large company relief claims, and 6.6% rise in SME subcontractor claims). The value of relief claimed rose by 7.7% to £1.1bn (£340m in SME claims, £750m in large company relief claims).
There’s some support to the view that the credits may increase R&D expenditure – R&D spend by SME claimants increased 11.3%, and the R&D spend of large company claimants was 8.3%. The SME spend is now consistently increasing year on year, after a rather flat first few years. The effect of the economy also has to be taken into account; the increase in spend seems unlikely to be solely due to the credits, particularly in the large company where the relief is worth barely 7% of R&D spend. For reference, ‘background noise’ threshold on incentives is generally around 6% – where the benefit is less than that, it’s often too much hassle to claim the incentive. Once we reach the 22% tax rate, the benefit of the large company relief will be 6.6% of expenditure.
This year, the stats show the regional and industry analysis for the first time. The regional analysis is largely useless, as it’s based on the registered office of the company and so has a disproportionate number in London and the South East. Tax returns don’t show where money is actually spent. The industry analysis shows claims are made overwhelmingly in the business services and manufacturing sector – no particular surprise, particularly as ‘business services’ is a catch-all covering everything from generic R&D to property.
Finally, it’s somehow comforting to see that vaccine research relief claims continue to trundle along at 10 per year, as they always have done. It’ll be a shock if and when that number ever changes (which it might: the vaccine research relief can no longer be claimed by SMEs, so it’s not impossible that the stats in a couple of years time will show a different figure).