Accredited official statistics

Research and Development Tax Credits Statistics: September 2024

Updated 26 September 2024

1. Key points

• the provisional estimated amount of total R&D tax relief support claimed for the tax year 2022 to 2023 was £7.5 billion, an increase of 1% from the previous year. This corresponds to £46.7 billion of R&D expenditure, 4% higher than the previous year

• the amount of tax relief claimed through the SME scheme fell by 3% compared with the previous year, while the relief claimed through the RDEC scheme increased by 7%

• the provisional estimated total number of R&D tax credit claims for the tax year 2022 to 2023 was 65,690, a decrease of 21% from the previous year. The decrease occurred in both schemes. The most notable impact was in the SME scheme, where the volume of claims is 23% lower than the previous year. In comparison, claims for the RDEC scheme fell by 9%

• there is an above average drop in the number of claims up to £15,000 and an increase in the number of claims above £250,000. This has resulted in a 28% increase in the average claim value compared to the previous year. This explains why despite a large drop in the volume of claims the total cost has grown slightly

• there is a concentration of claims by companies with registered offices in London (23% 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 67% of total claims and 70% of the total amount claimed for the tax year 2022 to 2023

• the figures for the latest available year, for accounting periods in the 2022 to 2023 tax year, are based on R&D relief rates prior to the reform of the R&D reliefs, but do include impacts of some administrative changes made to the schemes in order to improve levels of compliance in the R&D reliefs

2. Introduction

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

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 2022 to 2023.

Claims for the tax year 2022 to 2023 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, 2020 to 2021 and 2021 to 2022.

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 2025.

Statistical contacts: S Austin and M Rowe-Brown; [email protected]

Media enquiries: HMRC Press Office; [email protected]

3. Number of claims

The total number of R&D claims for the tax year 2022 to 2023 is estimated to be 65,690 – a decrease of 21% from the previous year (figure 1 and table RD1).

This is comprised of 55,325 Small or Medium-sized Enterprise (SME) scheme claims and 10,365 Research and Development Expenditure Credit (RDEC) scheme claims. The number of SME scheme claims can be broken down as: 23,805 claims which are purely for a deduction from CT liability and 31,520 claims which include a payable tax credit element in the tax year 2022 to 2023. This is a 23% decrease in the number of SME scheme claims compared to the previous year.

In the RDEC scheme, 3,675 claims are from large companies and 6,690 claims are from SMEs claiming under the RDEC scheme, for example 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 9% decrease in the number of RDEC claims since last year. This is made up of an 11% decrease in large company claimants and a 9% decrease in RDEC claims made by SMEs.

The large fall in the number of R&D claims for the tax year ending March 2023, in particular for the SME scheme, follows the implementation of the additional information form (AIF). This form requires companies to provide additional information to support an R&D claim and was made mandatory for all R&D claimants for claims submitted to HMRC from 8th August 2023. This requirement was brought in alongside other administrative changes to the schemes in order to improve levels of compliance in the R&D reliefs.

Figure 1: Number of claims for R&D tax credits by scheme, 2015 to 2016 tax year to 2022 to 2023 tax year

4. Amount of relief claimed

The total support claimed through both R&D schemes for the tax year 2022 to 2023 is estimated to be £7.5 billion (figure 2 and table RD2). This is an increase of 1% from last year’s total of £7.4 billion.

The £7.5 billion is comprised of £4.5 billion claimed through the SME scheme and £3 billion claimed through the RDEC scheme. Within the RDEC scheme £2.5 billion has been claimed by large companies and £545 million has been claimed by small and medium-sized companies. Although the volume of claims under the SME scheme is considerably 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 decreased by 3% compared with the previous year. Despite the fall in the number of claims, the total support claimed through the RDEC scheme has increased, by 7%, since the previous year. This is in line with previous years.

Figure 2: Total support claimed through R&D tax credits by scheme, 2015 to 2016 tax year to 2022 to 2023 tax year (£ million)

5. R&D expenditure

The amount of qualifying R&D expenditure used to claim R&D tax relief is estimated to be £46.7 billion for the tax year 2022 to 2023, an increase of 4% from the previous year (figure 3 and table RD4). Most of this expenditure (65%) was by companies claiming under the RDEC scheme.

Figure 3: R&D expenditure used to claim R&D tax credits by scheme, 2015 to 2016 tax year to 2022 to 2023 tax year (£ million)

6. Regional analysis

Figure 4 and table RD5 show the regional distribution of R&D tax credit claims by the company’s registered address for the tax year 2022 to 2023. 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 (23% 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 is the third largest region, contributing 10% of total claims and 12% of total amount claimed for the tax year 2022 to 2023.

The proportions of claims and amount claimed by region are in line with those seen in recent years.

Figure 4: Number and amount of R&D tax credits claimed by region of company registered address, 2022 to 2023 (£ million)

7. Industry sector analysis

Figure 5 and table RD6 show the distribution of R&D tax credit claims by industry sector for the tax year 2022 to 2023. The coding of industry sectors may not always reflect the sector of companies’ R&D activity.

Figure 5: Number and amount of R&D tax credits claimed by industry sector, 2022 to 2023 (£ million)

There is a concentration in the number of claims in the Information & Communication (25%), Manufacturing (24%) and Professional, Scientific & Technical (17%) sectors, accounting for 24%, 22% and 24% of the total amount claimed, respectively. These trends remain similar to previous years.

Figure 6: R&D tax credit claims by industry sector, % change between 2021 to 2022 and 2022 to 2023

Figure 6 shows that four sectors have a 40% or more decrease between the tax years 2021 to 2022 and 2022 to 2023: Wholesale & Retail Trade, Repairs, Accommodation & Food, Real Estate and Education. Those with the smallest decrease between years include our 3 largest sectors and Agriculture, Forestry & Fishing.

8. Cost band analysis

Figures 7 and 8, and table RD7, show the distribution of R&D tax credit claims by cost band for the tax year 2022 to 2023.

There is a concentration in the number of claims in the lower bands (64% in cost bands up to £50k), which corresponds to the large volume of claims in the SME scheme. This proportion has fallen by 5 percentage points compared to the previous year.

Figure 7: Number of R&D tax credit claims by cost band, 2022 to 2023

Figure 8: Amount of R&D tax credits claimed by cost band, 2022 to 2023 (£ million)

The largest concentration in amount claimed is in the ‘Over £2m’ band (33%), corresponding to R&D claims made by the largest companies. This proportion has increased by 6 percentage points in comparison to the previous year.

Figure 9: Number of R&D tax credits claimed by cost band, per cent change between 2021 to 2022 and 2022 to 2023

Figure 9 shows that there is an above average drop in the number of claims of up to £15,000 and an increase in the number of claims above £250,000. This trend is more pronounced in the SME scheme. Compared to the previous year, this has resulted in a 26% increase in the average claim value in the SME scheme and a 18% increase in average claim value in the RDEC scheme. This explains why despite a large drop in the volume of claims the total cost has grown slightly.

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 2022 to 2023 has not been included in figure 10.

In the tax year 2021 to 2022, there was an 18% decrease in the overall number of first-time applicants from the previous year. This is the third consecutive year that the overall number of first-time applicants has decreased. Prior to the 2019 to 2020 tax year, the number of first-time applicants had increased year-on-year.

Figure 10: Number of first-time applications by scheme, 2015 to 2016 tax year to 2021 to 2022 tax year

For the tax year 2021 to 2022, the number of first-time applicants in the SME scheme was 13,135, a decrease of 19% from the previous year.

The number of first-time applicants for the RDEC scheme was 2,545 for the tax year 2021 to 2022, an 11% decrease from the previous year. This trend appears to continue in the partial data for the tax year 2022 to 2023, however these figures are provisional and will be revised next year.

10. Changes to the R&D scheme

At the 2022 Autumn Statement changes to R&D relief rates were announced, taking effect for expenditure from 1 April 2023 onwards. The SME enhancement rate was 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 Spring 2023 which included maintaining the 14.5% SME credit rate for R&D intensive SMEs (those with R&D expenditure that is 40% or more of overall expenditure), to take effect for expenditure incurred from 1 April 2023.

Until 1 April 2024, the 2 reliefs in operation were: R&D Tax Credits for small and medium enterprises (SME scheme) and the Research and Development Expenditure Credit (RDEC). For accounting periods beginning on or after 1 April 2024, a new, single expenditure credit scheme started for companies of all sizes. Alongside this, an alternative scheme is available for R&D intensive, loss-making SMEs to claim instead, which follows the existing SME scheme for R&D intensive companies (though the intensity threshold is reduced to 30%). Therefore, the 2 reliefs available from 1 April 2024 are the Enhanced R&D Intensive Support (ERIS) and the merged scheme for R&D Reliefs. Further information on these schemes can be found on GOV.UK.

The impacts of these changes are not yet fully reflected in the statistics in this publication, which cover claims up to the tax year 2022 to 2023. Statistics on claims for the RDEC and the SME scheme under the new rates, including the SME intensive regime, will appear for the first time in the 2025 publication. Information on the merged and ERIS schemes will be presented for the first time in the 2026 publication.

11. Error and Fraud

Alongside the Annual Report and Accounts for the 2022 to 2023 tax year, on 17 July 2023, HMRC published a paper on the department’s compliance approach to the Research and Development tax reliefs.

In HMRC’s 2024 annual report an updated estimate of error and fraud for claims received in 2021-22 was published. For illustrative purposes HMRC also considered the possible error and fraud position for the tax year 2023 to 2024 following the implementation of several administrative changes. Details can be found on page 243 of HMRC’s annual report and accounts 2023 to 2024.

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