HMRC statistics – our commentary

The government is giving more of a boost than ever before to the UK’s most innovative companies, according to the latest statistics. HMRC has provided information on the number of companies claiming research and development (R&D) tax credits and Patent Box projected for the year 2019-20.

R&D tax relief highlights – what the stats tell us

It seems UK businesses have got the message about the value of R&D tax relief, the number of claims and the value of claims continues to grow year on year. SMEs account for a significant number of R&D claims and are reaping the rewards. We see companies claiming each year, it seems once you start looking for eligible expenditure there’s no going back. It becomes part of business as usual and funds future innovation and growth.

It is significant that there is an increase in large claims through the SME scheme, for claims over £500k, increase from 700 to 1,055 claims and £835m £1.255bn in support. At the other end of the spectrum, and perhaps to be expected, it’s great to see continued traction with small claims under £25k.  

Overall, it’s an incentive that continues to deliver for UK business but there is the potential for certain sectors and regions to do more. Does there need to be more activity in the North of England or Scotland to meet the objectives of the levelling up agenda? Whilst claims from the information, communication and technical sectors predominate, do we need to see more support for R&D in manufacturing to better align with the government’s R&D roadmap. Is there an underrepresentation in agriculture, transport or energy?

It’s also interesting to consider the number of first time claimants on the SME scheme. At what stage do businesses start claiming R&D tax credits – from day one or after the first few years? It’s important to make sure that start-ups are getting the message and are benefiting fully for the R&D they undertake.

graphic showing HMRC tax relief credit claim statistics

HMRC R&D tax credits claims since the schemes began

Patent Box highlights – what the stats tell us

If we consider R&D tax credits as a success with sustained growth then perhaps the same can’t be said in the take up of tax relief under Patent Box.

SMEs are receiving a tiny percentage of the value of the Patent Box scheme. The stand out statistic is that 92% of tax relief is claimed by large companies. We can see innovation as a continuum starting with R&D, which leads to IP creation and patents, finally culminating in a Patent Box claim. So why do SMEs get lost along the way? We should be seeing many of the companies claiming R&D tax relief go on to claim under the Patent Box scheme.

graphic showing HMRC patent box claim statistics

HMRC Patent Box claims since the scheme began

Why are SMEs claiming R&D tax relief but not Patent Box?

Here at GovGrant, we know our SME clients are innovating every day, resulting in significant rewards under the R&D tax relief scheme. Unfortunately we don’t see those same companies capturing and commercialising that innovation with an IP strategy or through a patent. The barriers could be:

  • Lack of awareness of the Patent Box scheme
  • Misunderstanding the mechanics of the scheme
  • Perceived complexity of legal process to create a patent
  • High cost upfront with no certainty of success
  • Belief that patents are about protection not value creation
  • Lack of awareness amongst accountants and advisors

Value claimed through R&D schemes

Projected for the tax year 2019-20

SMEs make up 64% of R&D tax relief claims 2018-19 pie chart

Value claimed through Patent Box

Projected for the tax year 2019-20

Large companies make up 92% of patent box R&D claims 2018-19 pie chart

R&D is a good indicator of a company’s potential for a Patent Box claim – it’s a conversation that every R&D tax relief claimant should be having.

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