Automotive investment up 4%

Investment in automotive innovation has risen by nearly 4% to reach £1.48bn.

This is according to analysis of new government statistics by leading global tax services and software provider, Ryan.

The data, released last week, was captured by HMRC and is based on claims made for research and development (R&D) tax relief, which incentivises businesses to undertake innovation.

Companies spent £1.48bn on motoring R&D, which includes manufacturing of vehicles, trailers and semi-trailers, in 2021/22, an increase of 3.9% from £1.42bn in 2020/21.

Over the same period, the number of R&D tax relief claims made by the sector rose by 7.7% from 520 to 560. In total, claims of £175m in R&D tax relief were made for motoring manufacturing, with an average claim value of £312,500.

Nigel Holmes, director, research and development at Ryan, said: “It’s great to see the motoring industry has its foot down on the gas and is increasing its annual spend on innovation. The motoring sector is always innovating, whether it’s to meet greener emissions targets or simply to go faster and further.

“While it is heartening to see increases in innovation spending, it is vital for the UK economy that this does not go into reverse gear. It is therefore concerning to see that the number of overall claimants for R&D tax relief has fallen for the second year running. This suggests that some companies may be nervous about claiming as a result of HMRC’s recent crackdown on fraud and error.

“While it is important for the credibility and robustness of the scheme that fraud and error are eliminated, HMRC’s scattergun approach may be starting to have a chilling effect on businesses. There is a risk that if companies do not feel it is worth claiming because they are nervous about the response from HMRC, they may be deterred from innovation altogether.”