HMRC's latest Research and Development Tax Credits Statistics: September 2020

R&D tax credits are a vital economic stimulus designed to encourage investment and spending in research and development activities, in order to promote the Country's economic growth, productivity gains, and competitiveness within the global marketplace.

The economic consequences of the COVID-19 pandemic mean such support is more critical than ever in providing, targeted, cash-based incentives, consistent with longer-term objectives in ensuring a sustainable recovery.

HMRC released their latest R&D tax credit statistics earlier this month and we wanted to share with you some of the key points;

  • As of 30 June 2020, there have been 59,265 R&D tax credit claims for 2018-19, of which 52,160 are in the SME R&D scheme.
  • As of 30 June 2020, £5.3bn of R&D tax relief support has been claimed for 2018-19, corresponding to £35.3bn of R&D expenditure.
  • There were 15,750 first time applicants for R&D tax credits in 2017-18, up 10% on the previous year. An increase largely driven by SME company claims.
  • Between 2000-01, when the R&D tax credit schemes were launched, and 2018-19, over 300,000 claims have been made totaling £33.3bn in tax relief claimed.
  • The Manufacturing, Professional, Scientific and Technical, and Information and Communication sectors continued to have the greatest volume of claims, making up a total of 66% of all claims and 71% of the total amount claimed for 2018-19.

Interestingly, it’s the Building and Construction industry we really wanted to talk about. During 2018 and 2019, HMRC have given more than £350m in support of R&D tax claims made in the construction industry. With more innovative tools and techniques appearing all the time, here at YesTax we’re certainly witnessing a boom in qualifying R&D activities taking place in this sector.

Our message is clear and if you’re working in this sector you need to listen up. The common theme and demand for sustainability, energy efficiency, and carbon reduction, together with improved off-site fabrication, advances in digital technology and the new smart road systems; is creating a wave of innovation within the construction industry. Through modern architecture and its innovative design approaches, and the requirement for energy-efficient structures, there is a definite need for construction to get smarter and more efficient too.

We often see the industry utilising new materials, processes and techniques in order to create quality structures which are attractive, sympathetic, energy efficient, compliant with building regulations, and low maintenance. Where solutions are being created (or attempted) which are unique or not readily known to experts in the industry, qualifying R&D is likely. Changing regulations and demanding socio-economic requirements continue to challenge the sector, and is exactly why it’s a hot topic for R&D.

In order to meet these challenges and remain competitive in the industry, companies endeavour to develop suitable tooling or technical solutions to overcome complex problems, typically relating to bridges, dams, roadways, buildings (particularly if listed or heritage) and other structural objects too.

The R&D tax relief scheme is an unmissable opportunity to claim either a reduction in corporation tax of up to 24.7p in the pound or, for loss making companies, a payable tax credit of up to 33.35p of any pound spent on qualifying R&D activity.

If you’re in this sector you must take note of the R&D tax credits scheme – it could be extremely valuable to the work that you do. If you’re in the industry and doing something similar to the examples above or about to take a new project on, we’d be delighted to hear from you. We undertake complimentary reviews to ensure you are maximising the opportunity, so whatever your circumstances, please get in touch!