The majority of research and development (R&D) tax credit claims were disputed or rejected last year, according to new research.
R&D tax credits are part of a government scheme to incentivise innovation. They offer companies tax relief on investments in developing new technologies.
Last year, 59% of R&D claims were either challenged or declined, according to the“2023 and Beyond: Unlocking UK Tech Growth Through R&D” report from R&D claims platform EmpowerRD.
“The findings indicate significant growth amidst challenges, underscoring the resilience and innovative spirit of the industry,” said EmpowerRD founder Hari Sandhu.
“However, the high rate of disputed or rejected R&D claims points to a need for clearer guidance and support.”
This follows reforms to the system brought in by Chancellor Jeremy Hunt that decreased the deduction rate for SME credits with the aim of reducing fraudulent claims.
The policy was met with a strong backlash from the tech community, including from the industry advocacy group the Startup Coalition.
After intense lobbying, Hunt announced further reforms during the Autumn Statement to reduce the tax rate for loss-making companies and lower the “intensity threshold” to qualify for credits.
The report from EmpowerRD also noted that around 29% of R&D budgets were spent on overseas contractors.