R&D Tax Credits
Research and Development (R&D) Tax Relief is designed to provide financial support to companies engaged in innovation and the development of new processes, products, and services. If your project aligns with the established criteria for R&D, you could potentially claim R&D Tax Credits.
Eligibility Critera
Projects eligible for R&D Tax Relief aim to make significant strides in scientific or technological advancements. It’s important to note that this relief is not applicable if the innovation pertains to:
- Arts
- Humanities
- Social sciences, including economics
Furthermore, the project should be relevant to your company’s trade, whether it’s an existing venture or a prospective one resulting from the R&D findings.
To make a successful claim, it’s necessary to elaborate on how the project:
- Strived for progress within its domain
- Faced and overcame scientific or technological uncertainties
- Endeavoured to tackle challenges that professionals in the field couldn’t readily resolve
Types of Relief
R&D Tax Reliefs are available for Small and Medium-Sized Enterprises (SMEs), with an R&D Expenditure Credit (RDEC) available for large companies.
An SME is defined as a company with:
- A staff count of under 500
- Turnover of less than £100 million or a balance sheet total of below £86 million
SMEs can deduct an additional 86% of qualifying expenditure in addition to the normal 100% deduction from their annual profits. Large companies claim an expenditure credit on qualifying expenditure.
Recent Changes
As of 8 August 2023, HMRC requires an additional information form to be submitted in advance of an R&D claim. This form must be completed before filing the company tax return; otherwise, the R&D claim will be removed from the tax return.
Additionally, from 1 April 2023, the additional tax relief available for all SMEs has reduced from 130% to 86%, with the cash R&D tax credit rate for loss-making companies reducing from 14.5% to 10%. However, for loss-making R&D-intensive SMEs, the cash R&D tax credit rate remains at 14.5%.
Please contact us if you need support or want us to instigate an R&D Tax claim.
