Businesses claimed an estimated £7.4 billion in R&D tax relief in the 2019/20 tax year, an increase of 19% from the previous year, Government data shows.
This corresponded to £47.5bn of R&D expenditure from those businesses, 15% higher than last year.
The £7.4bn tax relief was spread across 85,900 claims, primarily driven by a 16% rise in the number of SME R&D claims to 76,225, which comprised £4.4bn of credits.
The remaining £3.1bn of R&D relief came from the research and development expenditure credit (RDEC) scheme, which gives larger companies a tax credit calculated at 13% of their qualifying R&D expenditure.
The Government has a target to increase R&D investment to 2.4% of GDP and increase public funding for R&D to £22 million by 2027.
According to figures from the Office for National Statistics, R&D expenditure equalled 1.74% of UK GDP in 2019, far from the target given the slow growth of expenditure in the long term - R&D expenditure was 1.59% of GDP in 2008 and 1.72% in 2018.
A recent study from the Centre for Business Research at Cambridge Judge Business School said that, at the current rate, the Government would not achieve its 2.4% target.
Martin Smith, head of policy lab at the health research charity Wellcome Trust, said:
"Any slippage in the 2.4% target, and £22bn as a staging post towards it, is incompatible with the aim of cementing the UK as a science superpower."
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