HMRC’s latest statistics reveal a 26% decline in R&D tax credit claims for the 2023–24 tax year, marking the lowest number of claims in nearly a decade. While the total value of claims remains relatively stable at £7.6 billion, the sharp drop in claim numbers – particularly among SMEs – raises important questions about the future of innovation in the UK.
The decline in claims
The number of R&D claims fell to 46,950, down from 65,690 in the previous year. This decline is primarily due to changes in R&D tax relief schemes, including reduced rates and increased administrative requirements, which have disproportionately impacted smaller businesses.
SME claims dropped by 31%, while first-time claimants saw an even sharper 45% decrease. In contrast, claims under the R&D Expenditure Credit (RDEC) scheme experienced a smaller decline of around 5%. These figures suggest that while larger businesses continue to claim successfully, smaller innovators often struggle to navigate the increasingly complex process.
Increased average claim size
Despite the overall decrease in claims, the average value of claims has increased. Businesses that do claim are submitting larger claims – often those with more resources and experience in handling complex R&D tax processes.
At PM+M, we see firsthand how SMEs can struggle without expert support. Our role is to simplify the process, ensure compliance, and maximise the relief available – helping businesses continue innovating despite the challenges.
SMEs: the most affected
Reduced relief rates and heightened administrative burdens have made the R&D tax credit less accessible for smaller businesses. With the right guidance, SMEs can still access significant relief and continue driving growth.
Sectoral trends
Claims remain concentrated in specific sectors, with Information & Communication, Manufacturing, and Professional, Scientific & Technical sectors accounting for 71% of the total value of R&D tax relief. While these industries are crucial to UK innovation, there is room to encourage a wider range of sectors to engage in R&D.
Looking ahead
The decline in R&D tax claims presents both a challenge and an opportunity. While government reforms aim to reduce fraud and error, they could potentially risk discouraging genuine innovation if smaller businesses are left behind.
At PM+M, we help companies navigate these changes, ensuring that all eligible businesses – regardless of size or sector – can take full advantage of R&D tax credits. If your business is unsure whether it qualifies for R&D tax relief or needs assistance claiming, we can help. Our team of experts will guide you through the process, ensuring you maximise your claim and focus on what matters most – innovating and growing your business.
If you’d like to discuss how your business could make the most of R&D tax relief, get in touch with our team at enquiries@pmm.co.uk.
