• Swindon & Wiltshire Manufacturing
• Tuesday October 28 2025

Huge fall in West SMEs claiming R&D tax relief

There has been a £50 million fall in the number of SMEs in the South West making research & development tax relief claims, according to research by accountancy and advisory firm Azets.

The drop has prompted a specialist at the firm to warn that local businesses should use the valuable tax relief support – or lose it.

Chris Dale, a partner with Azets, issued the warning after analysing the latest HMRC figures for 2023-24, with the previous year’s data in brackets for comparison.

South West England had 2,780 claims [4,055] with a total cost of £195 million [£245 million].

Gloucestershire and Wiltshire accounted for 710 claims [1,050], followed by North Somerset, Somerset and Dorset at 780 [1,115] and West of England 650 [895].

Manufacturing led with 820 claims [1,110], followed by information & communication at 685 [875] and professional, scientific & technical at 505 [660].

Chris said: “We are finding that the reduced benefit for SMEs, the latest compliance rules and relatively high time and cost investment to make an R&D claim are discouraging SMEs, in particular smaller SMEs.

“The decrease is concerning because the funding helps encourage businesses to develop new technologies, which in turn benefit the regional economy.

“Innovation costs are considerable, yet successful innovation, whether a new product, service or process, can generate new revenues and additional tax, which then offset the relief. Companies with genuine claims should not be put off.”

Claims by SMEs – which account for nearly 99 per cent of businesses in the UK – fell by nearly one-third compared to the previous tax year.

Just under 47,000 R&D tax credit claims for 2023-24 were made overall, a fall of just over a quarter. Tax reliefs can be between £15 to £27 for every £100 spent on R&D, based on the government’s own figures.

Chris added: “The decrease, seen locally and across all the regions, is a crying shame because this kind of funding pays the people who help local businesses develop new and exciting technologies, which in turn grow the regional and wider economy.

“Innovation costs considerable money – and a lot of innovation wouldn’t happen without taxpayer support because loss-making companies wouldn’t risk bankrolling further financial hits and profitable ones may fear being dragged into the red without recourse to public money to offset R&D outlay.

“Yet successful innovation can generate new revenues for businesses and create new taxes which more than cover what was put in by the taxpayer. Companies with genuine claims should not be put off.

“Worryingly, the government’s figures show that SMEs aren’t making as many R&D tax credit claims, with a decrease of nearly one-third compared to the previous year, and this is undoubtedly a direct consequence of the latest compliance rules. Indeed, the number of claims last year for R&D tax credits by scheme overall was the lowest since 2016-17.”

The amount of tax relief claimed through the SME scheme in the UK fell by 29 per cent, compared with the previous year, to £3.15 billion.

In comparison, claims for the larger companies’ RDEC scheme fell by five per cent, although the amount of relief claimed rose by 36 per cent to £4.41 billion.

According to HMRC, the provisional estimated amount of total R&D tax relief support claimed for 2023-24 was £7.6 billion, a decrease of two per cent from the previous year and corresponding to £46.1 billion of R&D expenditure, which was one per cent lower.