R&D tax credits are changing from April 2023 - find out how it could affect your business
Find out how the qualifying cost categories and rates are changing for the SME and RDEC schemes and how corporation tax...
R&D Tax Credits are a great way to fuel the growth of your business. If you are claiming R&D Tax Credits for the first time, you may be curious to know how many startups and SMEs claim R&D Tax Credits every year, what is the amount usually claimed as R&D Tax Credits, and more.
In this article we’ve collected 5 interesting stats from HMRC’s latest statistics on R&D Tax Credits report dated 30 Sep 2020.
According to HMRC’s latest statistics on R&D Tax Credits, the total number of R&D claims made so far in the period 2018-2019 is 59,265. Of these, the total number of claims under the SME scheme so far in 2018-2019 is 52,160 and is predicted to increase by the end of 2020 (since claims are still being accepted for this period). R&D claims under the SME scheme have been increasing every year in the last 3 years, with a rise in claims by 17%-19% YoY.
Just as the number of claims under the SME scheme has increased, so has the amount claimed by the SMEs engaging in R&D to almost £3.0bn claimed under the SME scheme in the period 2018-2019. This is approximately 7.5% greater that the total amount claimed under the SME scheme in 2017-2018, which was £2.76bn.
Small businesses like yours with less than 500 employees have claimed an average of £57,227 worth of R&D Tax Relief so far for 2018-2019. However, there is no minimum amount that you will have to claim when you are claiming R&D Tax Credits under the SME scheme – 72% of the claims made under the SME scheme were claims of up to £50,000.
If a company is profit making, the R&D Tax credits are claimed as a deduction in the company’s Corporation Tax liability. On the other hand, if the company is loss making, companies claim payable tax credits, i.e. cash back from HMRC. Most early stage companies and startups claim payable tax credits as they are, as we can imagine, loss making companies . There has been a growth in the total number of claims which included a payable tax credit element (cash back) and the number of such claims in 2018-2019 was 25,455. So if your company is in its early stages, has made a loss and no revenue yet, you will still be able to benefit from payable tax credits on your R&D expenditure.
For company’s with a registered office in London, the average amount claimed under the SME scheme is £84,396, which is higher than the national average under the SME scheme, which stands at £57,227.
The regions in England that have the highest average claim amounts under the SME scheme are – London, East of England (Norfolk, Suffolk, Cambridgeshire, Essex), South East (Buckinghamshire, East Sussex, Hampshire, the Isle of Wight, Kent, Oxfordshire, Berkshire, Surrey and West Sussex), North West (Cheshire, Cumbria, Greater Manchester, Lancashire and Merseyside) and North East (Tyne and Wear, County Durham, Northumberland).
If your company is registered in any of the aforementioned regions, you can see an estimate of the R&D claim amount for SMEs in your area:
Unsurprisingly, the highest number of R&D claims in the UK are made by companies in London (10,190 in 2018-2019). This was followed by the South East, North West, East of England and the West Midlands, which accounted for the majority of R&D claims made under the SME scheme.
The increasing number of R&D claims under the SME scheme means that a greater number of claims made by earlier stage companies and startups. Indeed, in the period 2018-2019, almost 50% of all R&D claims were by companies under 10 years of age. This corresponds with the rising popularity of R&D tax credits for fuelling the growth of early stage companies and the increase in first time applicants.
We also see a continuous and regular increase in the number of first time applicants claiming R&D Tax Credits under the SME scheme – it has increased by 13% to 13,935 in 2017-18 ( from 12,350 in 2016-17). This rise is largely attributed to the growth of startups and early stage companies in the UK, increasing awareness among companies about the benefits of R&D Tax Credits and the removal of the minimum eligible expenditure under the SME in 2012.
As we could expect, the industries that have made the maximum number of R&D claims under the SME scheme in 2017-2018 are – Manufacturing (12,665), followed by Information and Communication (12,560) and Professional, Scientific and Technical (10,365). However, some of the industries that have the greatest average value of claims are Electricity, Gas, Steam and Air Conditioning (£86,957), Finance and Insurance (£72,727) and Professional, Scientific and Technical (£66,570).
Use our estimates of the average claim values across industries, based on raw data published by HMRC on R&D Tax Credits, to see how much companies in your industry are claiming:
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