R&D tax credits become concentrated towards fewer claimants
James Tetley, head of innovation and capital tax reliefs, RSM UK, comments on the latest Research and Development (R&D) tax credit statistics: “HMRC’s latest R&D statistics reveal the impact of the change in direction from HM Treasury and HMRC, in both how the relief is targeted and how compliance is managed.
“The number of first-time claimants has fallen for the fifth consecutive year, dropping sharply by 43% to 5,250 in the year. By contrast, in 2020-21, there were around 19,500 first time claimants. This suggests the R&D regime is no longer encouraging sufficient innovation in the UK in the form of start-ups or spin outs from universities.
“The majority (69%) of the total value of claims between 2024 and 2025 went to just 6% of claimants. In other words, around £5.65bn (of a total £8.2bn) is going to just 2,335 claimant companies, suggesting a concentration of R&D benefit to the very largest investors in science and technology. This will no doubt be helping the UK retain our biggest innovators onshore, which we must encourage, however the relief is not delivering enough value to the SME heartland, where much of our leading edge IP development starts out.
“Overall, we continue to see a trend from previous years where total R&D support continues to increase (up by 5%), but with a shift of this support away from smaller businesses in favour of larger claimants.
“We remain supportive of HM Treasury and HMRC’s efforts to improve the quality of claims made through increased compliance activity. Equally, stability in the regime is critical to building investor confidence in R&D tax credits as a mechanism to reduce the net cost of innovation to a business. However, these statistics suggest that the regime has moved away from its original objective of supporting the UK’s entrepreneurial SME community. Perhaps the chancellor will reflect on this, and look to consult on ways to move the dial towards a regime that balances strong levels of compliance with better and more accessible incentives for early stage, start up, and SME businesses that historically relied heavily on R&D tax credits to help them fund continuing innovation.”