Northern Ireland businesses have continued to invest in research and development despite ongoing economic pressures and increased scrutiny by HMRC, according to analysis of the latest R&D tax credit statistics released today.
The figures show that companies across Northern Ireland made 1,305 claims and claimed £140 million in R&D tax credits to March 2024 (down from 1,670 claims and claimed £155m to March 2023), accounting for 2.8% of the total number of claims nationally (an increase from 2.6% to March 2023) and 1.9% of the total monetary benefit claimed across the UK (2.0% to March 2023).
Of the 1,305 Northern Ireland claims submitted, 1,210 were made by small and medium enterprises (SMEs) (1,585 out of 1,670 total claims to March 2023), with the remainder claimed by larger companies. The average claim value for SMEs in the region was £66,100 (£63,100 to March 2023), while the overall average across all company sizes was £107,300 (£92,800 to March 2023).
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The data reveals that four sectors accounted for the majority of claims in Northern Ireland, mirroring UK-wide trends where manufacturing and technology companies continue to dominate R&D investment, with companies in the manufacturing and information and communication sectors making up 56% of claims and 64% of the value of claims (52% of claims and 61% of value to March 2023).
The statistics come as the impact of HMRC’s increased scrutiny into R&D tax credit claims, in an effort to reduce fraud and error, is beginning to take effect. Additional pre-notification and other filing requirements have been introduced over the last couple of years along with an overhaul of the R&D tax credit schemes aimed at modernising them to encourage investment in innovation. This has seen a fall in the number of R&D claims made in both Northern Ireland and throughout the UK.
Paul Eastham, R&D Incentives Associate Director at KPMG, said: "While the overall number of claims and value of these claims has fallen between 2023 and 2024, it is clear that our local companies are continuing to invest in research and development, and are more concentrated in specific sectors. The statistics also highlight that while the number of individual claims fell by approximately 22%, the value of claims only fell by approximately 10%”. This indicates that it is the very small claims that have dropped away, something that is not surprising given HMRC’s current focus.
Damien Flanagan, R&D Tax Incentives Partner at KPMG, added, “The importance of working with advisors with a deep knowledge of the R&D tax process can’t be overestimated to ensure claims are fully aligned with HMRC’s rules, particularly with the additional reporting requirements and increased scrutiny of the scientific basis for claims. R&D claimants must now name the advisor that assisted them with the claim preparation, which has led to HMRC launching investigations into some advisors. This has resulted in the first prosecutions being brought under the Corporate Criminal Offence rules, which were introduced in 2017.”
"The sustained level of R&D tax credit claims shows that businesses understand the critical importance of innovation for long-term competitiveness. However, we still see opportunities for more companies to take advantage of these valuable incentives which have the potential to provide a valuable source of funding – but taking care in the application process is important.", Paul Eastham said.
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