The state of R&D tax credits in 2018

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.

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 south-east 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.

Thinking of claiming R&D tax credits in 2019?

 At Kene Partners, our specialist R&D incentive advisors can work on your behalf to prepare and file your next R&D tax credit claim. The vast majority of our clients were not only unaware that R&D tax relief existed, but they were also unaware that their business was eligible.

Fortunately, HMRC’s latest figures for 2016-17 suggest that we are heading in the right direction. It shows that we’re helping more innovative businesses to tap into thousands of pounds of government money. This money is specifically set aside to help them push the boundaries of their respective industries.

Arrange a free consultation with our team of experienced and approachable tax incentive advisors today. At Kene Partners, our mission is to help innovative companies access millions of pounds of government money set aside to foster innovation. Your business could be next.