UK companies claimed £8.2bn in research and development tax relief last year despite a sharp fall in the number of claims, as government support became increasingly concentrated among businesses making larger applications.

HM Revenue & Customs estimated that R&D tax relief increased 5 per cent in 2024-25 from £7.8bn the previous year, while qualifying research spending rose 7 per cent to £51bn. The latest figures remain provisional because companies can still submit claims relating to the period.

However, the number of claims dropped 17 per cent to an estimated 40,325, continuing a decline seen in recent years. Claims by small and medium-sized companies fell 19 per cent, while those from large businesses increased 4 per cent.

The average value of a claim rose 27 per cent. Just 6 per cent of claims accounted for 69 per cent of the total value of relief, compared with 62 per cent a year earlier. Claims worth more than £2mn increased both in number and value.

HMRC said one factor behind the falling number of applications was the continuing impact of an additional information form introduced in 2023 as part of efforts to improve compliance.

The figures are the first to reflect reforms that replaced the previous schemes with a merged R&D Expenditure Credit and Enhanced R&D Intensive Support for qualifying loss-making SMEs from April 2024.

Support through the old SME scheme and its replacement intensive support programme fell 29 per cent to £2.3bn. Relief provided through the old and merged expenditure credit schemes increased 29 per cent to £5.9bn as companies moved to the new system.

Large companies accounted for £4.6bn of total relief compared with £3.6bn for SMEs. Qualifying R&D expenditure by large businesses increased 14 per cent to £30.2bn, while spending associated with SME claims fell 3 per cent to £20.7bn.

Manufacturing, information and communications, and professional, scientific and technical companies together accounted for 75 per cent of claims and 71 per cent of relief.

Carrie Rutland, tax partner at BDO, said the figures showed businesses were continuing to invest in innovation despite significant changes to the tax regime, but warned that the compliance burden was becoming increasingly onerous.

“Many businesses feel the compliance burden has become increasingly heavy, even where they have a long track record of making legitimate claims,” she said.

Rutland called on the Chancellor to adopt a more targeted approach in the Budget, including a simpler claims process for companies with strong compliance records.

“Greater certainty and a more proportionate approach would help innovative businesses invest with confidence in the UK while ensuring taxpayers’ money remains properly protected,” she added.