An examination of 2024’s R&D Tax Credit Statistics
By Robert Strutt
Oct 24, 2024
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R&D investment is vital for driving the UK’s economic growth through innovation. As such, the R&D Tax Credit statistics published by HMRC for 2024 reveal trends in R&D investment across the UK’s many different regions and industries, helping us to understand the current landscape of R&D activity in the country.
The latest statistics take us up to the tax year 2022 to 2023. Despite a decrease in the overall number of claims, the report shows a slight increase in terms of R&D expenditure and the amount of R&D tax relief support claimed.
But after drilling into the stats, it becomes clear that growth isn’t universal. There is stagnation in the amount of relief claimed by SMEs (through either the SME scheme or RDEC), and there are significant declines in several regions and industries within the UK. This raises potential concerns about the long-term health of innovation in the country.
In this article, we examine the latest Research and Development (R&D) Tax Credits Statistics report to reveal the mixed picture of R&D activity in the UK.
Number of R&D Tax Credit claims by financial year, 2018-19 to 2022-23
Financial Year
SME Total
RDEC Total
Total Claims
Total Returns
Total Companies
2018-19
65,940
8,595
74,535
74,400
72,110
2019-20
74,190
9,815
84,005
83,420
80,845
2020-21
76,500
10,825
87,325
85,540
82,840
2021-22
71,905
11,335
83,240
81,135
78,595
2022-23
55,325
10,365
65,690
63,395
61,630
While all numbers are provisional, the current estimates show that the number of R&D Tax Credit claims fell from 83,240 in 2021-22 to 65,690 in 2022-23 – a significant fall of 21%. Not only did the number of claims fall significantly, the total returns and the total number of companies claiming both fell by 22%.
The fall is mainly driven by a 23% fall in SME claims from 71,905 in 2021-22 down to 55,325 in 2022-23 (although RDEC claims were also down by 9%, from 11,335 in 2021-22 down to 10,365 in 2022-23).
The fall marks a continuing year-on-year trend of decline in the number of companies claiming R&D Tax Credits, as the revised figures show that the 2021-22 tax year was 5% down on the previous year.
HMRC attributes the sharp decline in 2022-23 to their new compliance measures, which were introduced to reduce fraud and error. Some of these measures include digital submissions, the additional information form (AIF) and the requirement for approval from a named senior officer of the company.
Despite the decline the in number of claims, the actual amount of R&D relief claimed has risen by 1% from £7.4 billion in 2021-22 to £7.5 billion in 2022-23.
The rise has come in the face of a 3% decrease in the total support claimed through the SME scheme. Instead, the increase has come from relief claimed through RDEC, which increased 7% on the previous year.
The overall amount of R&D relief claimed has grown year-on-year for the last two years.
The estimates show that qualifying R&D expenditure has increased by 4%. From 45.1 billion in 2021-22 to 46.7 billion in 2022-23. Most of the R&D expenditure was invested by companies claiming through the RDEC scheme (65%).
The overall growth in R&D expenditure was also driven by companies who claimed through RDEC – including large company and SME claims. SME expenditure rose by 14% for those using the RDEC scheme, while large company expenditure under the same scheme increased by 8%. In contrast, spending from companies claiming through the SME scheme decreased by 5%.
The decrease marks an end to consistent year-on-year growth for SME scheme expenditure. Even if you consider the rise in SME’s claiming through the RDEC scheme, overall SME expenditure declined by 1% in 2022-23 – considering the importance of SMEs to the growth of the UK economy, this is clearly disappointing. The UK Government should prioritise driving SME investment in innovation, and uncomplicated access to R&D tax relief can help to achieve this goal.
Regional growth
Region
Total cost (£ million), 2021-22
Total cost (£ million), 2022-23
Total cost growth
Total expenditure (£ million), 2021-22
Total expenditure (£ million), 2022-23
Total expenditure growth
North East
150
125
-17%
800
680
-15%
North West
560
530
-5%
3,030
3,000
-1%
Yorkshire and The Humber
365
315
-14%
1,965
1,805
-8%
East Midlands
330
315
-5%
1,915
1,855
-3%
West Midlands
480
470
-2%
3,080
3,270
6%
East of England
805
895
11%
5,305
5,925
12%
London
2,390
2,440
2%
14,495
14,820
2%
South East
1,300
1,390
7%
8,380
9,260
11%
South West
385
335
-13%
2,230
1,825
-18%
Wales
155
145
-6%
800
770
-4%
Scotland
335
360
7%
2,050
2,195
7%
Northern Ireland
145
155
7%
895
1,025
15%
Unknown
20
40
100%
190
315
66%
Total
7,415
7,515
1%
45,140
46,740
4%
HMRC’s report draws attention to the concentration of UK R&D taking place in London (or at least, by companies whose registered address is in London), with 23% of total claims and 32% of relief claimed taking place here. While this is certainly true, it’s interesting to note that year-on-year growth in London’s R&D was relatively small, with a 20% decline in the total number of claims and only a 2% rise in both the amount of relief claimed in the total R&D expenditure.
If we look at the statistics across the different regions, we can also start to see a mixed picture for UK R&D.
While the amount of R&D relief claimed rose overall by 1% – this growth wasn’t evenly distributed. Several regions saw significant decreases in claimed relief, with the largest decrease coming from the North East (-17%), Yorkshire and the Humber (-14%), and the South West (-13%).
In contrast, strong growth in the East of England (+11%), along with smaller increases in London (+2%), the South East (+7%), Scotland (+7%), and Northern Ireland (+7%), drove the overall national increase.
When looking at the total amount of R&D expenditure, we can see a similar picture. While overall there was a 4% increase in expenditure, several regions experienced declines, most notably the South West (-18%) and the North East (-15%). Yorkshire and the Humber (-8%) and Wales (-4%) also saw their expenditure fall.
The rise in expenditure was driven by increases in the East of England (+12%), Northern Ireland (+15%), the South East (+11%), Scotland (+7%), and the West Midlands (+6%).
Industrial growth
Industry Sector
Total cost (£ million), 2021-22
Total cost (£ million), 2022-23
Total cost growth
Total expenditure (£ million), 2021-22
Total expenditure (£ million), 2022-23
Total expenditure growth
A. Agriculture, Forestry, Fishing
90
95
6%
515
580
13%
B. Mining & Quarrying
105
100
-5%
665
725
9%
C. Manufacturing
1,690
1,690
0%
11,890
12,165
2%
D. Electricity, Gas, Steam and Air Conditioning
40
40
0%
265
285
8%
E. Water, Sewerage and Waste
45
35
-22%
245
210
-14%
F. Construction
520
420
-19%
2,890
2,550
-12%
G. Wholesale & Retail Trade, Repairs
380
245
-36%
2,095
1,560
-26%
H. Transport & Storage
65
45
-31%
360
275
-24%
I. Accommodation & Food
30
20
-33%
140
115
-18%
J. Information & Communication
1,685
1,785
6%
8,830
9,475
7%
K. Financial & Insurance
350
360
3%
2,715
2,740
1%
L. Real Estate
15
10
-33%
75
50
-33%
M. Professional, Scientific & Technical
1,480
1,800
22%
8,840
10,570
20%
N. Admin & Support Services
530
500
-6%
3,415
3,335
-2%
O. Public Admin, Defence & Social Services
15
15
0%
105
110
5%
P. Education
30
20
-33%
115
100
-13%
Q. Health & Social Work
90
75
-17%
460
375
-18%
R. Arts, Entertainment & Recreation
105
140
33%
620
835
35%
S. Other services activities
125
95
-24%
735
535
-27%
Other or unknown
25
20
-20%
165
155
-6%
Total
7,415
7,515
1%
45,140
46,740
4%
The majority of R&D relief claims are concentrated in three key sectors: Information & Communication, Manufacturing, and Professional, Scientific & Technical. Each of these sectors accounts for roughly a quarter of the total relief claimed (24%, 22%, and 24% respectively).
As with the regional analysis, we can also better understand UK R&D by breaking down year-on-year growth by industry. While the Information & Communication and Professional, Scientific & Technical sectors have experienced solid growth in terms of both R&D relief claimed and R&D expenditure, Manufacturing growth looks much smaller, as there was no increase in the amount of R&D relief claimed and R&D expenditure increased by just 2%.
A significant number of industries saw a decline in the amount of R&D relief claimed, with particularly steep drops in Wholesale & Retail Trade, Repairs (-36%), Transport & Storage (-31%), Accommodation & Food (-33%), Construction (-19%), Real Estate (-33%), and Education (-33%)
This means that growth in R&D relief claimed was driven by relatively few industries, including Agriculture, Forestry, Fishing (6%), Information & Communication (6%), Financial & Insurance (3%), Professional, Scientific & Technical (22%) and Arts, Entertainment & Recreation (33%).
Many industries also reduced their R&D expenditure during 2022-23, with notable declines in Wholesale & Retail Trade, Repairs (-26%), Transport & Storage (-24%), and Real Estate (-33%), Accommodation & Food (-18%) and Health & Social Work (-18%).
The increases in year-on-year R&D expenditure were led by Arts, Entertainment & Recreation (+35%), Professional, Scientific & Technical (+20%), Agriculture, Forestry, Fishing (+13%), Mining & Quarrying (+9%) and Information & Communication (7%).
How Leyton UK can help
Are you looking for regional or sector-specific advice for your R&D Tax Credits claim?
Our team of highly qualified tax and technical consultants are based throughout the UK and have field experience across a wide range of software, science and engineering industry sectors. This uniquely allows us to work across different industry sectors to understand and identify all the areas where you can claim R&D Tax Credits.
