Research and Development tax credit statistics are ‘good news for UK innovation’

The HMRC statistics published today (10 October 2019) show that there continues to be a year on year increase in the number of companies claiming Research and Development (R&D) tax credits.  This is good news for UK innovation, and is a good indicator that more companies are investing in technologies to help improve business performance.

The figures published by HMRC reveal that in the last year the Exchequer paid out £4.3 billion in R&D cash to support UK companies. This compares favourably to £3.5 billion paid out in the previous year. The upturn in companies claiming R&D cash also supports Crowe’s own experience with our clients, who are increasingly keen to explore whether they might be able to claim R&D cash.

Given the majority of those companies using R&D tax credits are small and medium-sized enterprises (SMEs), the uptake in companies claiming this valuable relief could encourage many innovative businesses to grow and expand and reach their full potential. Additionally, despite the on-going uncertainty surrounding Brexit continuing to impact on business planning, the figures show that more companies are willing to invest and focus on what they do well. In the long-term, this should help the UK economy to thrive and could help create a flourishing business environment which will attract further outside investment.

One unfortunate bi-product of the upward trend was that earlier in the year we noticed a significant lengthening in the time taken by HMRC to process R&D cash repayments.  This was due mainly to the increasing number of claims being made outstripping the slower rise in the number of HMRC’s R&D specialists available to process them.  This had caused some disquiet amongst those R&D advisors and companies submitting R&D claims, with some SME R&D claims taking around 3 months to be processed and some Large Company R&D claims more than 6 months. In recognition of this, HMRC drafted in 200 additional staff to help clear the backlog and we are pleased to see that the processing time is now hovering around HMRC’s 28 day target.

Whilst it is encouraging to see the evidence that more and more companies are making R&D claims, the fact is that there are many more innovative companies in the UK who are not. Whether the generally low uptake relates to a lack of understanding of the relief, or there are concerns over whether the business activities qualify, specialist advice can help to determine those eligible businesses and projects which stand to gain significant repayments for investment.