Anthony Lalsing – Head of innovation and R&D
The statistics in HMRC’s Research and development tax credits statistics report are largely positive, increasing R&D claims demonstrating more innovative businesses than ever are making claims across a wide range of industry sectors.
The ever increasing level of claims and new claims in particular also indicates there are companies continuing to miss out on the valuable reliefs available. Another concerning trend is the fall in the average SME claim potentially representing under claimed R&D tax relief.
Statistic 1 – R&D CLAIMS CONTINUE TO RISE
2016/17 – 52,335 R&D tax relief claims – 20% increase
2015/16 – 43,515 R&D tax relief claims
Not yet complete but already showing 48,635 with 6 months to go so a further increase seems likely.
Supported by an increase in first time applicants which in 2016/17 rose by 13% from 12,275 to 13,870.
The figures above are driven by increases in SME claims but overall demonstrate a positive trend with more businesses making R&D claims as awareness grows. There is concern with so many new applicants that there continue to be companies missing out which will lead to increasing new applicant numbers for the short to medium term.
Menzies have seen similar growth in the number of claims year on year, especially on the SME side and continue to make new claims for both existing and new clients as awareness grows.
Statistic 2 – Average value of SME R&D claims falling
2016/17 – £49,173
2015/16 – £53,876
The reducing average claim is driven in part by a number of small R&D claims being filed with more than half of R&D claims being below £20,000 and 18% of claims less than £5,000.
Menzies have not necessarily experienced the above with higher average claims likely due to more robust reviews ensuring all R&D qualifying costs are correctly identified. Although start up companies will invariably have small claims reducing the average some companies are clearly not maximising their claims.
Statistic 3 – London and the South East remain the heart of UK innovation
2016/17 R&D claims by location (of registered office), top 3:
SOUTH EAST 15%
NORTH WEST 11%
London and the south east are the leading locations for R&D claims as would be expected, London being a centre for innovation.
Menzies see a number of claims around London tech hubs and our client base which is centred around London and South East is made up of a number of innovative businesses.
Statistic 4 – The sectors you would expect making most claims
2016/17 claims by industry sector top 3:
INFORMATION & COMMUNICATION 24%
PROFESSIONAL, SCIENTIFIC & TECHNICAL 19%
The tech and manufacturing sectors remain strong in relation to innovation.
Menzies own statistics mirror the figures above with our technology and manufacturing sector clients making more claims than any other sector. The above being said we have made claims in a number of niche sectors/industries and the statistics for these sectors appear low, again indicating companies are missing out, possibly because they assume they cannot claim if not in technology, manufacturing or science sectors.
Why make an R&D tax relief claim?
R&D tax reliefs are part of the government’s strategy to incentivise innovative companies and offer generous tax reliefs to companies investing in R&D.
While the statistics show a growing number of R&D claims as awareness increases, the number of new claims made every year clearly demonstrates there continue to be companies missing out, possibly assuming they do not qualify because they are not the stereotypical “men in white coats” type of business.
As for companies already making claims, well obviously this is good news but not the end of the story, many are still not maximising the return from their R&D claims.
If you have never made an R&D claim before and need advice or are looking to maximise your existing claims please contact us.