Research and development relief
The Research & Development (R&D) tax credits is an incentive scheme designed to encourage innovation and increase spending on R&D activities by companies who operate in the UK.
The Small or Medium Sized Enterprise (SME*) R&D scheme was introduced in 2000. Since then rates have risen significantly. The 2023/24 tax relief allows companies to:
- deduct an extra 86% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 186% deduction
- claim a tax credit if the company is loss making, worth up to 10% of the surrenderable loss
* For a company to be regarded as an SME it must have less than 500 staff and meet at least one of the following: an annual turnover not exceeding €100 million or an annual balance-sheet total not exceeding €86 million.
The Research & Development Expenditure Credit (RDEC) scheme replaced the Large Company Scheme in 2016. RDEC can also be claimed by SMEs who have been subcontracted to do R&D work by a large company or who have received a grant or subsidy for their R&D project.
The RDEC rate is 20% for your company's qualifying R&D expenditure incurred on or after 1 April 2023 and is a tax credit.
What constitutes R&D?
To get R&D relief businesses need to explain how a project:
- looked for an advance in science and technology
- had to overcome uncertainty
- tried to overcome this uncertainty
- couldn’t be easily worked out by a professional in the field
The project may research or develop a new process, product or service or improve on an existing one.
How we can help
Needless to say the savings can be extensive and with the right tax advice, making an R&D claim is relatively straight forward.
We have proven experience of successfully preparing and agreeing R&D
claims across a number of sectors including manufacturing, engineering,
software and technology. To find out more about claiming R&D tax credits, please contact us on 023 9248 4356.