Latest HMRC Tax Credit Statistics 2023 – Overview and Analysis

A National Statistics publication has recently been produced by HM Revenue and Customs (HMRC). The data relates to the number of companies claiming Research and Development (R&D) tax credits in the UK by sector and region and the associated costs to the Exchequer covering the tax year 2021 to 2022.

Key Findings:

  • Growth in R&D Claims – the provisional estimated amount of total R&D tax relief support claimed for the tax year 2021 to 2022 was £7.6 billion, an increase of 11% from the previous year. This corresponds to £44.1 billion of R&D expenditure, 8% higher than the previous year.
  • Increase in Companies Claiming – the provisional estimated total number of R&D tax credit claims for the tax year 2021 to 2022 was 90,315, an increase of 5% from the previous year. The increase is driven by a rise in claims across both the SME and RDEC schemes.
  • Higher Average Claim Values – The average value of R&D tax relief claims increased by 6% in 2021 and 2022. This was driven by an average increase of 9% in SME scheme claim values, possibly due to the COVID-19 pandemic preventing companies from carrying out R&D activity in the prior year.
  • Geographical Insights – Companies with registered offices in London and the South East made the most claims; London was responsible for 22% of all claims and 32% of the total claimed amount, while the South East accounted for 15% of claims and 18% of the amount. However, this does not necessarily pinpoint the actual locations of R&D activities.
  • Sector-Specific Trends – the Information & Communication, Manufacturing, and Professional, Scientific & Technical sectors 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 to 2022.

Substantial Growth in R&D Tax Relief

In the tax year 2021 to 2022, HMRC estimate that total R&D tax relief reached £7.6 billion, signifying an 11% increase from the previous year. This aligns with an 8% increase in total R&D expenditure, totalling £44.1 billion. This indicates a notable commitment to innovation and research within the UK. The average value of R&D tax relief claims also increased by 6% in the tax year 2021 to 2022, with the SME scheme experiencing a 9% increase.

Figure 1: Total support claimed through R&D tax credits by scheme, 2015 to 2016 to 2021 to 2022 (£ million)

 

The SME Scheme Continues to Dominate

The Small or Medium-sized Enterprise (SME) scheme is by far the most widely used of the R&D schemes available, with 79,205 of the 90,315 total claims. Just over 11,000 RDEC scheme claims were also made.

Figure 2: Number of claims for R&D tax credits by scheme, 2015 to 2016 to 2021 to 2022

 

Claim Numbers Remain Concentrated in London & South East

When analysing R&D investments across the UK from 2021 to 2022, it becomes evident that London and the South East continue to have the highest concentration of claims compared to the rest of the UK. London, with its global financial hub status, takes the lead by accounting for 22% of total claims and 32% of the total amount claimed in R&D tax relief (£1.3 billion). Similarly, the South East has experienced a substantial uptick in R&D amounts claimed from £1 billion to £1.2 billion.

Although most regions have recorded growth in R&D claim numbers and amounts, areas like Inner London and East of England have experienced a decrease in total expenditure. Nuanced regional fluctuations reinforce the importance of continuous evaluation and policy adjustments to foster and evenly distribute R&D investments across the UK.

Figure 3: Number of R&D tax credit claims by region of company registered address, 2021 to 2022

 

Manufacturing, ICT, and Professional, Scientific and Technology dominate claims

Manufacturing, Information & Communication, and Professional, Scientific, & Technical were the busiest industry sectors for R&D tax credit claims in 2021/22. With the Information & Communication and Manufacturing sectors each making up 23% of claims, followed by the Professional, Scientific and Technical sectors at 16%, we note an unwavering push towards digitisation and technological advancement. It is worth speculating whether the pandemic may have expedited digital transformation initiatives, fuelling more R&D in these sectors.

Other sectors that engaged heavily with the scheme last year include Construction, Wholesale & Retail Trade, Repairs, and Construction and Admin & Support Services.

Figure 4: Number of R&D tax credit claims by industry sector, 2021 to 2022

 

Get in Touch

We’ve been in the tax business for over 25 years and have claimed back over £110 million in R&D tax relief for thousands of innovative businesses. From initial assessment through to the submission of a comprehensive report, your claim will be managed by tax experts who will be honest about what qualifies and what does not.

If you have any questions regarding the National Statistics report or require assistance in preparing or submitting R&D tax relief claims, please contact team@costcare.co.uk or call 0161 904 0044.

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