If your business is developing new products, processes, materials or services then it is likely you will be able to claim UK R&D tax relief.
R&D (Research & Development) is a government scheme which rewards businesses (excluding partnerships and sole traders) that invest in innovation.
The scheme was introduced in 2000 to stimulate innovation and encourage businesses to engage more in research and development projects by taking on some of the financial risk involved.
Most larger businesses and organisations already take advantage of the scheme. However, still – 20 years later – many smaller businesses remain in the dark when it comes to R&D.
We want to change this and bring the scheme to the wider business community…
How does it work?
The Research & Development tax scheme allows companies to have up to one third of their R&D expenditure reimbursed by the government.
Put simply: say your staff spend 100 hours on R&D, up to one third of their time can be paid for by the government to encourage innovation.
R&D tax credit claims can be filed retrospectively, for accounting periods ending in the past two years. The best results come from identifying and recording qualifying activities on a real-time basis and we can help with this.
The incentive comes in the form of a tax break for profitable companies, but the great news is that even loss-making companies can make a claim in the form of a tax credit!
Types of Incentives
The scheme also recognises that not every attempted R&D project succeeds and therefore does not discriminate against failed attempts, so the R&D expenditure will still be claimable so long as a genuine attempt has been made to resolve ‘uncertainty’. See below for different categories of R&D:
- R&D Tax Relief/Credits:
- Relief: SME companies can benefit from a reduction in Corporation Tax equivalent to 25% of R&D expenditure, claimable for up to 2 years after the end of the relevant accounting period
- Credits: SME companies in a loss-making position can surrender those losses to claim a cash Tax Credit of up to 33% of R&D expenditure for up to 2 years after the end of the relevant accounting period
- R&D allowances: Tax relief is available on 100% capital allowance for capital equipment and buildings used for R&D
- Patent Box relief: A reduced corporation tax rate of 10% is placed on profits stemming from patented technologies
- RDEC scheme: The RDEC (Research & Development Expenditure Credit) scheme was introduced in 2013 to replace the previous Large Company Scheme for R&D tax credits. This scheme is less generous than the SME scheme with the net benefit at ~10% of the R&D expenditure. RDEC is designed for larger companies that do not meet the SME criteria. However, SMEs can also claim under the RDEC scheme if this is not possible under the SME scheme, for example when an SME receives notified state aid to fund an R&D project.
We can help!
We understand that often SMEs simply don’t have the time or the resources to organise making these claims themselves.
If you would like to find out more, please don’t hesitate to get in touch.