R&D Tax Relief Claimants Grow As Innovation Flourishes

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Her Majesty's Revenue & Customs has released stats on R&D tax relief claimants, indicating that SMEs are undergoing an innovation boom with businesses projected to have claimed £7.4 billion in 2019/20.

The Information & Communication has made the most claims but that figure is skewed as construction products will often include  Information & Communication in their development. However, construction products are right up there when it comes to the type of things claimed for by the 76,225 SMEs who took advantage of the innovation tax boost in the  period. The number of SMEs claiming R&D Tax Relief has increased by over 40% in the two years between 2017/18 and 2019/20.

Leyton, the UK’s leading innovation funding consultancy, took a review of the HMRC stats and found that though the data does not cite a cause for the increase in claims, SMEs across industries are increasingly incorporating technology into their operations to prepare for a high-tech future, such as integrating automated processes, Artificial Intelligence (AI), and machine learning.

The data shows a steady but consistent increase in the number of claimants has continued since the scheme was introduced two decades ago.

Construction

Whilst there has been a significant increase to the number of claims in technology-driven sectors, growing sectors are still to take full advantage of the R&D Tax Relief scheme. The new figures show that the top three fastest-growing industries in the UK, in terms of the number of companies, made up only 8% of all claims in 2019/20. These were construction (7.0%), Transport & Storage (1.0%), and Electricity, Gas, Stream and Air Conditioning (0.3%).

Regional divide

The data also shows a regional disparity, with London as the top region in terms of claims (20% of the 85,900 total) and the region benefitting most from the scheme (an average of £88,000 per claim.)  Conversely, regions in the North and North East have benefitted less, with Yorkshire and the Humberside being the region to have benefitted the least (£38,000 average per claim).

 “2021 is turning out to be a big year for UK innovation, and HMRC’s recent figures are a clear indication that UK SMEs are making the most of well-established government schemes which can help to drive innovation. Schemes like this can help businesses invest in technology to help prepare for a high-tech future and investing overhauling old systems, increasing productivity and efficiency.”

– Martin Sharkey 

Head of consulting, Leyton UK

More to come

"The figures show that there is still a clear regional disparity across regions and growing sectors are yet to fully make the most of these schemes," adds Leyton's Sharkey. "There is undoubtedly more to come from companies in growing markets where the idea of R&D has not yet been full considered."

Picture: An R&D engineer.

Article written by Cathryn Ellis
27th October 2021

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