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In the UK government’s latest Budget, Chancellor Philip Hammond reaffirmed a commitment to increasing total investment in research and development (R&D) to 2.4% of GDP by 2027. This is a significant vote of confidence in the role of R&D in industry innovation and R&D tax credits can also play a huge role in supporting bold, ambitious businesses to break new ground.

If you are wondering about the state of R&D tax credits in recent times, you’ll be pleased to know that HM Revenue and Customs (HMRC) recently published its most up-to-date figures on R&D tax credit claims. These cover the 2016-17 financial year. They don’t show the complete picture for 2018. However, they are indicative of the long-term trend towards cementing the UK as a destination of choice for innovation.

R&D in the UK

The total value of R&D tax relief claimed in 2016-17 totalled £3.5 billion – a tenfold increase on the £350 million claimed in 2010. Furthermore, the number of small and medium-sized enterprises (SMEs) making R&D tax credit claims has more than doubled since 2013-14.

However, the increase in take-up is not just restricted to the UK’s SMEs. A whopping 5,900 claims for Research and Development Expenditure Credit (RDEC) were made in 2016-17. Only companies with over 500 employees can claim RDEC and this figure represents a 185% claim increase since RDEC’s inception.

Three-fifths (60%) of all claims made for R&D tax relief were concentrated in London, the southeast of England or East Anglia. Meanwhile three-quarters (75%) of the total amount of R&D tax relief claimed in 2016-17 was derived from the following business sectors:

  • Manufacturing
  • Professional
  • Scientific & Technical
  • Information and Communication

R&D tax credits remain great value for money for the UK government. HMRC believes that for every £1 given to ambitious businesses in R&D tax credits, up to £2.35 is generated in R&D expenditure. That’s because many innovators and fast-growing companies opt to use their R&D tax relief to hire more highly-skilled staff, invest in new machinery or grow their business premises. The upshot is that the national economy is boosted by a renewed surge in productivity.