It’s true. The number of businesses claiming R&D and benefiting from R&D tax credits has been rising in recent years. It has been reported that during the most recent financial year a total of 59,265 claims were made, both through the RDEC and SME schemes. This translates to a total tax relief saving of £5.3bn.
However, the total qualifying expenditure recorded in this year was £35.3bn, making the amount of relief claimed just over 14%. Considering that the maximum possible value of an R&D tax credit claim is 33%, this indicates R&D tax credits are still being under utilised.
While the days of R&D being reserved for the medical and scientific fields are gone, there are sectors that are benefiting more than others from R&D tax credits. The reasons for this are varied. Nevertheless, if your client belongs to one of these sectors they could be in a good position to benefit from R&D tax credits. Read on to find out what they are.
The data
The data used to inform this piece has been collected by the Office for National Statistics and can be found on the government website here. It features the latest available statistics on R&D tax credits, which covers the accounting period from 2018-19. Due to the time frame of R&D tax credits, this was last examined on the 30th of June 2020. This is because the deadline for the 2018-19 accounting year was 31st March last year. HMRC then allows an extra three months to process all the remaining claims so a complete data set can be analysed.
This data reveals which industries within the UK economy are benefiting most from R&D tax credits. It does this by showing how many successful claims each industry is producing, as well as how much these claims are worth. The statistics go a step further by revealing the breakdown of the schemes that were used in each sector. In doing so, we are privy to information on the makeup of the businesses in these sectors.
Read about the types of companies that can claim R&D tax credits.
1. Information and communication
- Total SME claims – 12,165
- Total RDEC claims – 400
- Total RDEC claims made by SMEs – 855
This sector has thrived in recent years thanks to developments in technology, most notably in software and online media. Designing new and innovative ways of communicating is a key feature of modern marketing. As such, regardless of whether sales increase or work becomes more efficient, the methods used in this sector are likely to be R&D.
Example companies found in this sector:
- Satellite telecoms services, both wired and wireless.
- Insurance firms.
- Directories, mailing lists and book publishing companies.
- Movie production firms.
- Fund management firms
2. Manufacturing
- Total SME claims – 11,895
- Total RDEC claims – 1,035
- Total RDEC claims made by SMEs – 1,035
This sector has the most broad-reaching applications when it comes to R&D tax credits. This is because the development of new products and processes, or the improvement of existing ones, is something that sees companies invest in R&D. The benefit of R&D tax credits to manufacturing businesses is amplified as the additional funds always get reused. One example is in addressing changing industry standards
As seen in the figures, a large number of SMEs also benefit from R&D tax credits in the manufacturing sector as they conduct it on a small scale. In addition, SMEs are often contracted to undertake work on a part of the manufacturing process by larger companies. This allows them to claim through the RDEC.
Example companies manufacturers:
- Vehicles and industrial and electrical equipment.
- Glass, wood, paper and metal products.
- Clothing.
- Food and drink.
3. Professional, scientific and technical
- Total SME claims – 10,045
- Total RDEC claims – 510
- Total RDEC claims made by SMEs – 1,015
R&D tax credits are particularly valuable for the fields of science and engineering because they offset the cost of testing new technologies and materials.
Example companies:
- Security.
- Architecture.
- Media and advertising agencies.
- PR and communications.
- Tax consultancies.
4. Wholesale & retail trade, including repairs
- Total SME claims – 6,120Total RDEC claims – 295
- Total RDEC claims made by SMEs – 280
Many costly R&D projects take place within this sector. From streamlining solutions to automation to software, it all involves an investment of time and money. The qualifying R&D expenditure produced by this sector is not solely focused on projects that benefit companies.
Example companies:
- Vehicle sales including repairs.
- Sale of goods including household, chemical and agricultural.
- Wholesalers of goods such as electrics, clothes and cosmetics.
5. Admin & support services
- Total SME claims – 3,085
- Total RDEC claims – 185
- Total RDEC claims made by SMEs – 170
The growing popularity of cloud-based services and the SaaS model has made Admin & support services a prime sector for R&D. Developing these platforms and making them accessible and scalable often involves conquering uncertainty.
Example companies:
- HR.
- Call centres.
- Tour operators.
- Recruitment.
*The number of claims is not an indication of the number of companies within these sectors. This is because companies are not limited to a single claim per year. Your client can apply under multiple schemes, or they may have their accounting periods overlap during the year in question.
You can read about the timeframe of R&D tax credits and how to apply if your client is a startup here.
made.simplr can help your client claim R&D tax credits
If your client isn’t a part of any of the top five fields for claiming R&D tax credits, don’t worry, they are just as eligible. Though they might be unsure of what sort of work they can claim for, and in turn how much their claim is worth. Made.simplr’s online tax credit portal software will make this process clear and efficient with access to many useful features.
Input your client’s accounting information quickly and easily to get an accurate quote. Then consult our team of experts and ensure your client gets the maximum benefit from their R&D tax credit claim.
Book a demo today!
