News story

UK businesses receive £2.9 billion boost to invest in Research and Development

Mel Stride: “UK businesses are leading the way in technology and innovation”

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British businesses investing in Research and Development (R&D) received £2.9 billion support from government in the last year, with a particular boost for small businesses, official statistics showed today.

From advanced engineering to life sciences, R&D tax credits support UK businesses to make the investment they need to innovate so that Britain remains at the cutting edge of technological development. Scientists creating a new artificial bladder system for patients with urinary difficulties, or specialists developing new IT encryption and security techniques, are just two examples of the qualifying R&D.

Mel Stride, Financial Secretary to the Treasury and Paymaster General said:

From manufacturers to scientists, Britain’s brilliant entrepreneurs are leading the way in technology and innovation.

We will continue to support these businesses so that they can promote growth across the country and compete in the global economy.

The figures also show that R&D investment by UK businesses is at a record level, demonstrating the positive effect of government support.

And more than ever before, the scheme has helped small businesses get the boost they need to remain competitive, with claims by small and medium enterprises (SMEs) up by 22% to 21,865, and most of the increase since last year down to first-time SME applicants.

For every £1 of government support businesses receive, businesses invest up to £2.35 in the UK economy through R&D.

Further Information

  • Qualifying science and technology research by UK businesses was almost £23 billion in 2015-16, up from £22.1 billion in 2014-2015 and adding a sixth successive year of increased qualifying spending.

  • The ‘Manufacturing’, ‘Professional, Scientific and Technical’, and ‘Information and Communication’ sectors continued to have the greatest volume of claims – accounting for 73% of tax credit claims.

  • Between 2000-01, when the R&D tax credit schemes were launched, and 2015-16, over 170,000 claims have been made and almost £16.5 billion in tax relief claimed.

  • Research and Development (R&D) Tax Credits allow companies to claim an enhanced corporation tax deduction or payable credit on their research and development costs. There are two schemes for claiming R&D tax credits: The Research & Development Expenditure Credits (RDEC) and the Small or Medium-sized Enterprise (SME) scheme.

  • RDEC was introduced in 2013 to replace a previous scheme for large companies. The RDEC offers a tax credit which is paid “above the line” meaning that it has greater visibility in a company’s accounts and provides an immediate benefit to loss makers.

  • The SME scheme is available to companies with fewer than 500 employees and an annual turnover under €100m or a balance sheet under €86m. It offers more generous relief than the RDEC since small companies find it relatively difficult to undertake and finance R&D.

  • Including their normal tax deduction, R&D tax credits effectively reduce the cost of R&D by 28% for a large company and up to 44% for an SME.

Published 14 September 2017