National statistics

Research and Development Tax Credits Statistics: September 2023

Updated 28 September 2023

1. Key points

• 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

• 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

• dividing the total cost of R&D relief by the total number claims for the most recent years shows that there was a 6% increase in the average value of claims in 2021 to 2022. This is driven by an average increase of 9% in the SME scheme and could be due to recovery from the COVID-19 pandemic, which may have prevented some companies from carrying out their normal levels of R&D activity in the tax year 2020 to 2021

• there is a concentration of claims by companies with registered offices in London (22% of total claims and 32% of total amount claimed), and the South East (15% of total claims and 18% of total amount claimed). However, the registered office location may not be where all the R&D activity takes place

• 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

2. Introduction

This is a National Statistics publication produced by HM Revenue and Customs (HMRC).

It provides information on the number of companies claiming Research and Development (R&D) tax credits and the associated cost to the Exchequer for claims covering accounting periods that end in a particular financial year. The latest year information is available for is the tax year 2021 to 2022.

Claims for the tax year 2021 to 2022 can still be submitted past the cut-off date for this publication. The statistics for the latest tax year are provisional and have been grossed up to account for claims not yet received. Statistics will be revised in next year’s publication to include claims received after the cut-off date, which can sometimes result in large changes between the publications. Similarly, this year’s publication revises figures for tax years 2019 to 2020 and 2020 to 2021.

The statistical tables are published on GOV.UK alongside this commentary document, together with information on the background and methodology.

The next release is planned to be in Autumn 2024.

Statistical contacts: S Austin and M Rowe-Brown; ct.statistics@hmrc.gov.uk

Media enquiries: HMRC Press Office; news.desk@hmrc.gov.uk

3. Number of claims

The total number of R&D claims for the tax year 2021 to 2022 is estimated to be 90,315 - an increase of 5% from the previous year (figure 1 and table RD1).

This is comprised of 79,205 Small or Medium-sized Enterprise (SME) scheme claims and 11,115 Research and Development Expenditure Credit (RDEC) scheme claims. The number of SME scheme claims can be broken down as: 37,455 claims which are purely for a deduction from CT liability and 41,745 claims which include a payable tax credit element in the tax year 2021 to 2022.

In the RDEC scheme, 4,695 claims are from large companies and 6,420 claims are from SMEs claiming under the RDEC scheme because they are undertaking the R&D as subcontractors, or the R&D is subsidised, and so they are unable to claim under the SME scheme. This is a 6% increase in the number of RDEC claims since last year, driven by an increase in the number of large companies claiming RDEC.

Overall, there has been a small increase in both the number of SMEs and large companies claiming R&D tax relief.

Figure 1: Number of claims for R&D tax credits by scheme, 2015 to 2016 to 2021 to 2022

4. Amount of relief claimed

The total support claimed through both R&D schemes for the tax year 2021 to 2022 is estimated to be £7.6 billion (figure 2 and table RD2). This is an increase of 11% from last year’s total of £6.8 billion.

The £7.6 billion is comprised of £4.8 billion claimed through the SME scheme and £2.8 billion claimed through the RDEC scheme. Within the RDEC scheme £2.4 billion has been claimed by large companies and £415 million has been claimed by small and medium sized companies. Although the volume of claims under the SME scheme is much larger than under the RDEC scheme, the average claim size is generally much larger for RDEC than SME.

The total support claimed through the SME scheme has increased by 14% compared with the previous year. The total support claimed through the RDEC scheme has also increased, by 7%, since the previous year. The average claim value has increased by 6% overall compared to the previous year, driven by increased support claimed in the SME scheme. The increase in support claimed may in part be due to recovery from the COVID-19 pandemic, which may have prevented some R&D activity taking place. There was no growth in R&D relief claimed in the 2020 to 2021 tax year, which is out of step with recent years.

The cost of support for both the SME and RDEC schemes has increased substantially in recent years, coinciding with periods of increased relief rates in both schemes. At the 2022 Autumn Statement a number of changes to R&D relief rates were announced. The SME enhancement rate has now been decreased to 86% and the SME credit rate reduced to 10%. At the same time, the RDEC rate was increased to 20%. Further changes were announced in the Spring 2023 fiscal event, which maintained the 14.5% SME credit rate for certain companies. These changes take effect on expenditure incurred from 1 April 2023. Due to the lag in R&D data, the impacts of these changes are not yet reflected in this publication.

Figure 2: Total support claimed through R&D tax credits by scheme, 2015 to 2016 to 2021 to 2022 (£ million)

5. R&D expenditure

The amount of qualifying R&D expenditure used to claim R&D tax relief is estimated to be £44.1 billion for the tax year 2021 to 2022, an increase of 8% from the previous year (figure 3 and table RD4). Most of this expenditure (60%) was by companies claiming under the RDEC scheme.

The increase in expenditure from the previous year is seen across both schemes and may reflect an increase in R&D activity since the COVID-19 pandemic. As explained above, these figures are provisional and will be revised next year, which could result in large changes.

Figure 3: R&D expenditure used to claim R&D tax credits by scheme, 2015 to 2016 to 2021 to 2022 (£ million)

6. Regional analysis

Figures 4 and 5, and table RD5, show the regional distribution of R&D tax credit claims by the company’s registered address for the tax year 2021 to 2022. The registered address may not be where actual R&D activity is carried out.

This shows a concentration of claims by companies with registered offices in London (22% of total claims and 32% of total amount claimed), and the South East (15% of total claims and 18% of total amount claimed). The East of England has the third largest amount claimed with 11% of the total but is the fourth largest region based on the number of claims. The North West has the third largest number of claims but is the fourth largest region based on the amount claimed. The proportions of claims and amount claimed by region are like those seen in recent years.

Figure 4: Number of R&D tax credit claims by region of company registered address, 2021 to 2022

Figure 5: Amount of R&D tax credits claimed by region of company registered address, 2021 to 2022 (£ million)

7. Industry sector analysis

Figures 6 and 7, and table RD6 show the distribution of R&D tax credit claims by industry sector for the tax year 2021 to 2022. The coding of industry sectors may not always reflect the sector of companies’ R&D activity.

There is a concentration in the number of claims in the Information & Communication (23%), Manufacturing (23%) and Professional, Scientific & Technical (16%) sectors, accounting for 23%, 23% and 21% of the total amount claimed, respectively. These trends remain similar to previous years.

Figure 6: Number of R&D tax credit claims by industry sector, 2021 to 2022

Figure 7: Amount of R&D tax credits claimed by industry sector, 2021 to 2022 (£ million)

8. Cost band analysis

Figures 8 and 9, and table RD7 show the distribution of R&D tax credit claims by cost band for the tax year 2021 to 2022.

There is a concentration in the number of claims in the lower bands (69% in cost bands up to £50k), which corresponds to the large volume of claims in the SME scheme.

The largest concentration in amount claimed is in the ‘Over £2m’ band (27%), corresponding to R&D claims made by the largest companies.

Figure 8: Number of R&D tax credit claims by cost band, 2021 to 2022

Figure 9: Amount of R&D tax credits claimed by cost band, 2021 to 2022 (£ million)

9. First time applications

Figure 10 and table RD8 show the number of first-time applicants in the SME and RDEC schemes for each year. Partial data for the tax year 2021 to 2022 has not been included in this chart.

In the tax year 2020 to 2021, there was a 1% decrease in the overall number of first-time applicants from the previous year. This is the second consecutive decrease in the number of first-time applicants. Prior to the 2019 to 2020 tax year, the number of first-time applicants had increased year-on-year. This decrease is driven by a reduction in the number of first-time applicants within the SME scheme. First-time applicants to the RDEC scheme have increased each year since the 2017 to 2018 tax year.

Figure 10: Number of first-time applications by scheme, 2015 to 2016 to 2020 to 2021

For the tax year 2020 to 2021, the number of first-time applicants in the SME scheme was 16,240, a decrease of 3% from the previous year.

The number of first-time applicants for the RDEC scheme was 2,705 for the tax year 2020 to 2021; a 14% increase from the previous year. First-time applicant growth for RDEC has been consistently high in recent years, while first-time applicants for the SME scheme have now fallen in consecutive years.

10. Error and fraud

In HMRC’s annual report and accounts for the 2022 to 2023 tax year an updated estimate of error and fraud in the R&D schemes for claims received in 2020 to 21 was published. Details are included in the paper on the department’s approach to the R&D reliefs.

In the resource accounts in the annual report, for illustrative purposes HMRC also considered the possible error and fraud position for 2022 to 2023 expenditure. Details are set out on page 258 of the HMRC annual report and accounts 2022 to 2023.

The statistics contained in this publication do not include any assessment of the levels of error and fraud within the schemes.