R&D statistics reveal a historic drop in claim value. What does this mean for your business?

R&D statistics reveal a historic drop in claim value. What does this mean for your business?

As the number of R&D claims continue to rise, the value of claims across the North have dropped for the first time in over twenty years. What does this say about innovation in the North?

For the first time since the tax relief was established in 2000, the value of R&D claims has dropped according to HMRC’s latest statistics. Although these figures are outside of trends seen in the past, it is worth keeping in mind that the UK saw a 7% growth in total claims submitted throughout the UK this year.

And with the majority of claims submitted by SMEs during the pandemic, these figures show that businesses have continued to push the boundaries and think outside of the box during adverse times. Especially in the North where the number of claims have risen by 6%.

Regional innovation in the North

Despite the number of claims in the North having risen, the figures show that the region is lagging behind others which are within a closer proximity to London, such as the South West.

The North East, Yorkshire, Humber, North West and Scotland combined, only account for 26% of all R&D claims, which is disappointing when considering the region embodies a wealth of innovation.

The North East is home to one of the largest growing tech sectors and the highest number of computer science students in England; Yorkshire boasts an impressive heritage rooted in the textile industry with growing industries such as financial services; whilst Manchester remains a hub of digital innovation. All of which places the region at the forefront of forward-thinking business.

And whilst the total number of claims across the North and Scotland exceeded 23,500, the average claim value is a huge 46% less than the national average.

So, why exactly has claim value fallen?

A glimpse into the effects of the pandemic

As businesses grapple with the long-term effects of the pandemic and subsequent shifting priorities, this year’s statistics are our first glimpse into how this has affected business confidence and investment. Whilst still remaining at the heart of innovation within the UK, the value of claims has dropped by nearly £5,000 across the Northern regions of the UK, including Scotland.

Even though we saw the very best of entrepreneurial spirit during the pandemic, with some completely reinventing their business operations to accommodate for the needs of their communities, this could suggest that other innovative projects were perhaps scaled back.

HMRC's escalated compliance measures

HMRC’s amplified compliance regime could have also contributed to a lower claim value. As a dedicated team crack down on error and fraud, the number of claim enquiries has increased significantly for business owners.

With changes coming into play this April, which will result in an increased claim review period and requirements for a more detailed submission, the submission process is set to become more complicated still. While the increased compliance will help to safeguard the scheme and ensure that innovative businesses can continue to reap the benefits of the relief, the increased scrutiny and more stringent rules could have acted as a deterrent.

Reviewing a claim could be your best chance of ensuring that they not only is your claim within the BEIS guidelines.

The year ahead

As the cost of doing business rises, innovation will be crucial in order to adapt, pivot and thrive. Research and Development tax relief will continue to play a pivotal part in the innovation process, but as HMRC implements more stringent rules, it’s more important than ever to speak to a qualified advisor to ensure you’re maximising the value of your claim whilst still staying compliant.

If you have any queries about R&D, or need support with your claim, please feel free to get in touch with our incentives and reliefs team. Comprised of qualified tax advisors, ex-HMRC inspectors and industry experts, we’re well equipped to support you with your claim in the year ahead.