R&D Tax Credits: A Look Back at 2020 (the Year that Stood Still)

With the global pandemic stopping companies in their tracks, 2020 will go down as the year that stood still for many. With many businesses simply focusing on keeping their heads above water, was research and development top of the list of priorities?

HMRC has just released their annual R&D tax credit statistics. These statistics show us, over the course of 2020, how many R&D claims were made, how much was claimed over the year, which industries claimed the most and what type of businesses were making these R&D tax credit claims.

So, let’s find out if 2020 really was the year that stood still…

How many R&D tax credit claims were made in 2020?

The total number of R&D tax credit claims that were made in 2020 was 85,900 which is a 16% increase from 2019. This shows us that R&D was still a priority for many businesses, despite the struggles they faced during 2020.

If we break this number down further, we can see that 4,370 claims were made by large companies under the RDEC scheme, 5,305 claims were made by small and medium-sized companies (SMEs) that claimed under the RDEC scheme as subcontractors, and 76,225 were made by SMEs under the SME R&D tax credit scheme.

Why has the number of R&D claims risen?

Perhaps surprisingly, given the nature of the year just gone, the 16% rise in the number of claims has been driven, largely, by SMEs. But, with the number of first-time SME claimants also having risen by 25% and the number of first-time RDEC applicants by 7%, it’s becoming clear that the increased visibility of both the SME and RDEC R&D tax incentives is clearly working. Companies are starting to see the benefits that claiming for R&D tax credits brings. Plus, with R&D tax specialists like Myriad Associates on hand to offer help, advice and support for companies that want to claim the maximum amount of R&D tax relief possible, this figure is only going to keep rising.

We know how many claims companies have been making and under which scheme, but what we really want to know is how much support the government paid out in R&D tax relief last year.

How much R&D tax credit did these companies claim?

The total amount of R&D tax relief that was paid out last year has increased by 19% from last year’s amount, which was £6.3 billion, to £7.4 billion.

And, alongside the number of claims made, it seems that SMEs are also getting the bigger slice of the pie when it comes to the amount of funding they receive. The government paid out 25% more in R&D tax credits under the SME scheme, which amounts to £4.4 billion compared with larger companies that only received £3.1 billion under the RDEC scheme.

“Although the volume of claims under the SME scheme is much larger than under the RDEC scheme, RDEC claims are generally much larger than those claimed by SMEs.” – HMRC

But, although 72% of claims made were £50,000 or less, 33% were over £2million and were undoubtedly made by larger companies.

So, we know how much companies are receiving in R&D tax credit support, now it’s time to drill down into the interesting stuff and see what industries are making the most out of the R&D tax incentives and where in the country these little pockets of innovation seem to be.

What type of companies claimed R&D tax credits in 2020?

Similar to the previous year, companies within the Information and Communication, Manufacturing, and Professional, Scientific and Technical industries made the most claims. Combined, these industries accounted for 65% of the total claims made, with the Information and Communication and Manufacturing sectors making 22% of the claims, and the Professional, Scientific and Technical sector making 19%.

In terms of location, it’s no surprise that the South came out on top when it came to making claims for R&D tax relief. Companies with registered offices in London made 31% of the total claims, and the South East as a region made 18% of all claims. But, the North West were hot on the heels of London and the South East and were third in the number of claims made in 2020.

These facts, figures and statistics show that R&D is still very much a priority for both large and small companies and that more and more companies are seeking support from the government-funded R&D tax relief incentives.

To find out more about the incentive and if you’re eligible to receive funding for your innovative projects, speak to the Myriad Associates tax relief team on 0207 118 6045 or drop them a message here.

Myriad Associates have been filing R&D tax returns on behalf of their clients for over a decade. Their seven-star customer service and right-first-time approach when making claims mean they have a solid relationship with HMRC. This allows them to get the maximum amount of R&D tax relief possible and means that their claims are paid out efficiently, every time.