Why it matters: Innovation funding helps businesses develop new products, services and processes – from tech start-ups to manufacturers to food producers. The funding is worth up to £27 for every £100 spent on R&D but local experts warn the 30% drop from 520 claims in 2022-23 to 365 in 2023-24 suggests genuine businesses are being scared off by a system that was designed to support them.
What's changed: The government introduced major reforms to the R&D regime in 2023 and ramped up compliance activity to crack down on bogus claims but industry experts warn the changes have had unintended consequences. Flaws in the application system have forced some successful claimants to repay tax relief more than a year later – after the money had been spent on wages, prototypes and vital materials. The unpredictability is deterring even businesses with valid claims, Azets warned the government earlier this year.
HMRC does not record why claims are abandoned, making it difficult to distinguish between fraudulent applications being withdrawn and genuine businesses giving up because the process has become too costly to navigate.
What they're saying: Ann Minsons, a corporate tax director at Ensors, said: "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."
She added: "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."
She described the trend as "a crying shame because this kind of funding pays the people that help local businesses develop new and exciting technologies which in turn grow the regional and wider economy".
By the numbers: Suffolk's drop in R&D claims from 520 to 365 between 2022-23 and 2023-24 mirrors a national collapse, with SME applications down nearly one-third to their lowest level since 2016-17. Norfolk fell from 615 to 405, while the East of England overall dropped from 5,345 to 3,625 claims.
The amount claimed through the SME scheme fell by 29% to £3.15 billion nationwide. Nationally, smaller claims worth £15,000 or less have seen the sharpest decline, with first-time applicants dropping by 45% even before the major 2023 reforms took effect.
For context: Ensors is an Ipswich-based accountancy firm with more than 130 years of history and offices across the region. It was acquired by international advisory group Azets in September 2025.
What's next: HMRC is understood to view the reduction in claims as evidence that fraud is falling, though industry experts argue genuine claimants are also being deterred.
The government has committed to "periodically evaluating" the reliefs but given no timeline. Industry bodies have called for the system to be allowed to stabilise after rapid successive changes, warning that constant policy shifts make it difficult to assess which measures are effective.
This leaves Suffolk SMEs uncertain about when, or if, the system will become less risky to navigate.
The bottom line: Ensors warns that Suffolk is losing out on innovation funding that could drive new products, create jobs and grow the regional economy – not because businesses are ineligible but because the compliance system has become too unpredictable to navigate safely.
Have you walked away from an R&D claim because the process felt too risky or unpredictable? Get in touch with matthew@ipswich.co.uk.
