Fewer claims but more value – What do HMRC's statistics tell us about future of R&D tax relief claims?

The time has come for HM Revenue and Customs (HMRC) to release their annual statistics concerning the effectiveness of R&D tax relief claims.

The statistics provide a great opportunity to understand how R&D tax relief claims are currently being utilised and how this might shape reforms of the system going forward.

What do HMRC statistics show us about the current state of R&D tax relief claims?

The most interesting revelation from the statistics is the decrease in the overall number of R&D tax relief claims being filed.

In the 2023 to 2024 tax year, 46,950 R&D tax relief claims were made, which is 26 per cent fewer claims than the previous year.

What makes this figure compelling is that this is the first indication of the impact of the tightening scrutiny that has been implemented over the past few years.

These R&D tax relief claims are the first to universally require the Additional Information Form (AIF), which undoubtedly made R&D tax relief claims a more involved process.

It is possible that much of the decrease is from businesses and accountants who may have used the more lax system to submit claims in the hope of securing some undeserved funds.

The AIF makes submissions more challenging, thus raising the standard of the scheme.

This is reflected in the fact that the overall value of R&D tax relief claims has been largely unaffected by the decreased submissions.

Despite there being 26 per cent fewer submissions, the overall value of R&D tax relief claims dropped by only two per cent.

This indicates that higher quality, higher value submissions were being made in the wake of the AIF being introduced, as the time-consuming nature of submission justifies a more in-depth examination of qualifying expenditure.

Rather than frivolously submitting smaller claims, it seems like there has been a shift towards carefully considered, maximised R&D tax relief claims.

What do the HMRC statistics tell us about the future of R&D tax relief claims?

AIF does seem to have spearheaded a positive shift in R&D tax relief claims.

While the number of claims submitted does not necessarily reflect the quality of the claims, it is telling that the value has been unaffected by such a sharp drop.

This is at odds with the doomsaying that occurred in 2021 and 2022 where the Treasury and other prominent figures panned R&D tax credits and claimed they were a significant source of revenue leakage.

If R&D tax reliefs were wasteful, then a reduction in claims would also see a reduction in value as both would be closely tied to error and fraud.

The fact that value persists demonstrates that R&D tax relief is a vital part of the UK infrastructure and should be sustained and enhanced in the future.

In particular, we would want to see the statistics influence the trajectory of R&D tax relief claims as they are indicative of greater care being taken to make claims more substantive and rewarding for innovative businesses.

£7.6 billion was awarded through the R&D tax relief scheme in the 2023 to 2024 tax year based on £46.1 billion of R&D expenditure.

We would hope that those figures will inspire innovative businesses to give serious thought to claiming R&D tax reliefs if they have not previously done so or if they have not submitted maximised claims.

Given the success of compliance measures in driving down claims while preserving the value of the scheme, we can expect HMRC to continue to require AIFs to be submitted, given that this change has had a notable impact.

The time of careless R&D tax relief claims is over, but the value of the scheme is more apparent than ever.

We want to continue to push for higher-quality R&D tax relief claims.

This includes defending eligible claims from enquiry and ensuring that all qualifying expenditure is covered.

To make the most of R&D tax relief, be sure to speak to our team today!