The number of research and development tax credit claims fell by 17 per cent in the 2024 to 2025 financial year, according to HMRC statistics published yesterday, even as the total value of relief claimed rose to £8.2bn.
HMRC estimated that 40,325 claims were made in the year. The fall was driven by an estimated 19 per cent drop in claims by small and medium-sized enterprises, while the number of claims made by large companies rose by an estimated 4 per cent.
Total relief claimed rose by 5 per cent, which HMRC said corresponded to £51.0bn of R&D expenditure, 7 per cent higher than the previous year. The HMRC figures for the latest year are provisional and will be revised next year to include claims received after the cut-off date.
The average claim value rose by 27 per cent compared with the previous year, according to HMRC. The tax authority said the increase was driven by claims over £2m, which rose by 14 per cent in number and 21 per cent in value.
HMRC said 6 per cent of claims accounted for 69 per cent of the total value of relief claimed in 2024 to 2025. Large companies received £4.6bn of relief across the schemes, and SMEs received £3.6bn.
Relief claimed through the SME and enhanced R&D intensive support (ERIS) schemes fell by 29 per cent to £2.3bn. HMRC attributed this largely to SMEs claiming under the new merged R&D expenditure credit (RDEC) scheme, and to new rates of relief under the SME scheme applying for a full year of expenditure. Relief claimed through the RDEC and merged RDEC schemes rose by 29 per cent to £5.9bn.
The statistics are the first to include the merged RDEC scheme and ERIS, which were introduced for accounting periods beginning on or after 1 April 2024. HMRC said that, given the scale of the changes, SME-level figures for 2024 to 2025 are not comparable with previous years.
HMRC said a key driver of the fall in claim numbers is believed to be the continuing impact of the additional information form, which was brought in to improve compliance and has been mandatory for all claims submitted since 8 August 2023.
The tax authority has increased its scrutiny of claims after estimating that fraud and error in the R&D schemes amounted to £4.1bn between 2020 and April 2024.
Justine Dignam, partner at Claritas Tax, linked the figures to the government’s reindustrialisation plans. Chancellor John Healey set out what he called a “new age of industrialisation” in his Labour conference speech on Monday, Reuters reported.
“John Healey is right that reindustrialisation has to be driven by business. However, SMEs will be the backbone of any growth plan and the latest R&D figures show the current tax regime is not supporting the strong SME base we desperately need,” Dignam said.
She added: “The money is going to fewer, larger claims with many SMEs being put off by an onerous application process, increased HMRC scrutiny and a higher risk of enquiries with a protracted enquiry process. SMEs need the cash to invest in technology and hire skilled people in order to thrive and push the UK onto a surer footing.”
“The current system means larger companies with bigger resources can more easily handle the claiming process whereas a 20-person engineering firm will find this more difficult,” she said. “If HMRC’s crackdown on poor-quality claims ends up deterring genuine ones, the Treasury saves money in the short term and loses growth over the long term.”
Dignam also pointed to wealthy people leaving the UK, “some of whom will be angel investors backing the successful SMEs of the future”.
“If the Chancellor is serious about reindustrialisation, next month’s Budget should make R&D relief simpler, more generous and more accessible for SMEs,” she said.
HMRC has previously defended its approach. In April 2025, as a technology start-up disputed a demand to repay its R&D credit, an HMRC spokesperson said: “R&D reliefs play a vital role in the Government’s mission to boost economic growth and we’re committed to ensuring the claims process is straightforward for genuine claimants.”
Healey will deliver his first Budget on 28 October.
