The number of small and medium-sized firms claiming research and development tax credits fell sharply last year.

The provisional estimated total number of research and development tax credit claims for the tax year 2022 to 2023 was 65,690, a decrease of 21 per cent, according to HM Revenue and Customs.

Although the total relief support claimed rose by one per cent to £7.5 billion, the number of claims dropped by 23 per cent in the small and medium-sized enterprise scheme.

Heather Williams, tax partner at Hampshire accountancy firm Azets, said: "This large fall in SME claims can be put down in part to the implementation of the additional information form (AIF) for claims made after August 8, 2023.

"Allowable only in a digital format, this includes breaking the costs down across qualifying categories, listing projects and providing a detailed description of the R&D, as well as describing what advances in scientific or technical knowledge the R&D is hoping to achieve.

"Each claim also needs to be endorsed by a named senior officer of the business, and any agent who has advised on compiling the claim must also be named. Businesses which have not made a claim in the previous three years must also inform HMRC of the intention to make a claim within six months of the end of their accounting periods.

"However, while the changes will have had little impact on businesses which are already complying with the additional information guidelines – such as those advised by Azets – it will have had big ramifications for companies who may have previously been attempting to possibly circumvent the regulations."

Azets, which has offices in Southampton, Portsmouth, Winchester, Romsey, and Havant, has been active in lobbying for reforms to the current research and development tax relief scheme.

The firm has proposed a more straightforward, business-friendly framework to the Chancellor ahead of the October 30 budget, aiming to foster innovation and growth across the UK.