Information & Communication Industry UK R&D Tax Credit Expenditure

  • By Sam Todd
    • May 11, 2023
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With software and technology advances continuing to shape how we live and work, the information & communication industry has become a vital leader of the UK’s innovation landscape, driving progress in areas such as cloud computing and cybersecurity.

The 2023 R&D Tax Credits Statistics shows that the innovation in the sector is in robust health. If we look at the last five years’ worth of data, we can see that the sector has weathered political and economic uncertainties better than most.

This strong trajectory of growth is expected to continue, especially with the revised regulations regarding qualifying expenditure for R&D. Traditionally, the UK government has been lagged in supporting its modern R&D components, with essential functions of digital innovation (licence payments for datasets & data analytics and cloud computing costs) having only been recently included as qualifying expenditure for R&D Tax Credits. This welcome addition is likely to drive further R&D innovation and investment, and it’s clear that the UK government sees the sector as vital to the overall success of the UK’s economy, as evidenced by the UK’s Digital Strategy.

Information & Communication industry R&D Tax Credit claims

The 2021–22 tax year saw a bounce in the number of claims, climbing by 10% year-on-year from 18,425 to 20,340. This breaks down to 17,900 SME scheme claims, 645 RDEC claims from large organisations, and 1,670 RDEC claims from SMEs.

The increase in claims was driven by the number of SME scheme claims (up from 16,210 in the previous tax year) and RDEC claims (up from 535). There was actually a slight fall in the number of RDEC claims by SMEs (down from 1,680).

It’s worth noting that 22.5% of all claims came from the Information & Communication sector – the second amount of claims from any industry sector behind Manufacturing (23%).

Amount of Information & Communication industry R&D Tax Relief claimed

Growth in the amount of R&D cash relief claimed by the Information & Communication industry slowed during the 2020–21 tax year – a particularly difficult year for the UK economy following the global pandemic. While growth had slowed, this actually showed the robustness of the sector, as the majority of other industries saw a decline in relief claimed during COVID-19.

For 2021-22, the growth in relief claimed rose by 18% year-on-year, putting it back to pre-covid levels of growth.

The Information & Communication sector claimed 23% of all financial support given out through R&D schemes during 2021-22.

Information & Communication industry research and development expenditure

Over the last five years, the sector has seen a healthy period of year-on-year growth, culminating in 17% year-on-year growth from 2020-21 to 2021-22. Again, this reflects a return to the level of year-on-year growth seen before the global pandemic, where growth slowed to 8%.

This growth rate surpasses the average, as other UK sectors experienced an average increase of 8% in the 2021-22 tax year.

Overall, the information & communication sector had the third highest amount of qualifying R&D expenditure (behind professional, scientific and technical and manufacturing) with 20% of all qualifying R&D expenditure.

Information & communication industry’s contribution to the UK economy

According to the international trade administration, the UK is the largest information and communication technology (ICT) market in Europe. Not only this, research from IBIS World shows that the market size of the UK’s software sector is increasing faster than the economy overall (echoing some of what we’ve seen in terms of ICT R&D expenditure).

Data from the Office of National Statistics, shows that in 2020 UK businesses spent over £5 billion on ‘digital’ R&D (18.7% of all UK business R&D). ‘Digital’ R&D is defined as computer programming and information services, telecommunications, and software development.

This all has huge implications for the UK economy. Global Data expect the UK’s ICT market to generate $960.21 billion between 2022 to 2026. According to Statistica, nearly 1M people are working in the UK’s information and communication industry. In fact, Tech Nation’s most recent survey showed that Software developers are still the most in-demand tech job across the UK..

R&D Tax Credits in the Information & Communication industry

The information & communication sector is a clear success story. It’s an obvious area for investment and future innovation and is widely expected to drive the UK’s economy into the future.

Did you know that over 60% of software businesses are eligible for R&D Tax Credits? If your business creates innovative solutions in the Information & Communication sector, you may be eligible for significant tax relief. Discover more about how we’ve helped software companies claim R&D Tax Relief.

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Author

Sam Todd

Senior R&D Consultant 

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