R&D Tax Credit Tax Relief
R&D tax credits are a tax relief incentive provided by the UK government to encourage businesses to invest in research and development activities. The aim is to support innovation and drive economic growth by providing a financial incentive to companies that are undertaking qualifying R&D activities.
What type of R&D credits are available?
SME R&D Tax Credits:
Small and medium-sized enterprises (SMEs) with fewer than 500 full-time employees, and either an annual turnover of less than €100 million or a balance sheet total of less than €86 million, can claim SME R&D tax credits. SMEs can claim up to 186% (previously 230%) tax relief on qualifying R&D expenditure, which means that for every £100 spent on qualifying R&D, an additional £86 (previously £130) can be deducted from the company’s taxable profits, resulting in a reduction in the amount of corporation tax owed or, if the company is making a loss, to claim a cash payment.
R&D Expenditure Credit (RDEC):
Large companies and SMEs that do not qualify for SME R&D tax credits can claim RDEC. RDEC is a tax credit of 13% for expenditure incurred on or after 1 April 2020 and increased to 20% for expenditure incurred on or after 1 April 2023, which can be used to reduce the amount of corporation tax owed or, if the company is making a loss, to claim a cash payment.
Whether or not you qualify for R&D tax credits depends on several factors, including the nature of your business, the R&D activities you have undertaken, and the relevant eligibility criteria. Here are some key considerations:
- Nature of your business: R&D tax credits are typically available to companies that are subject to corporation tax in the UK. However, some other entities such as charities or universities may also be eligible in certain circumstances.
- Qualifying R&D activities: To qualify for R&D tax credits, your R&D activities must meet certain criteria, such as seeking to achieve an advance in overall knowledge or capability, involving technical uncertainty, and being aimed at advancing science or technology.
- Eligibility criteria: The eligibility criteria for R&D tax credits vary depending on the type of credit you are applying for. For example, to qualify for SME R&D tax credits, your company must have fewer than 500 employees, and either an annual turnover of less than €100 million or a balance sheet total of less than €86 million. Large companies and SMEs that do not qualify for SME R&D tax credits can claim the R&D Expenditure Credit (RDEC).
To qualify for R&D tax credits, the R&D activities must meet certain criteria, such as being aimed at advancing science or technology, involving technical uncertainty, and seeking to achieve an advance in overall knowledge or capability. It is important to note that the eligibility criteria and the amount of relief available may vary depending on the specific circumstances of each case, and it is always advisable to seek professional advice to determine eligibility and maximize the potential benefits.
What is R and D tax relief?
- R&D tax relief is a government scheme that provides tax breaks to businesses that invest in research and development.
What activities qualify for R&D tax relief?
- To qualify for R&D tax relief, the activity must be genuinely experimental or innovative. This means that it must involve the search for new knowledge or the application of existing knowledge in a new way.
What costs are eligible for R&D tax relief?
- The costs that are eligible for R&D tax relief include the costs of staff, materials, equipment, and external consultants.
How much R&D tax relief can I claim?
- The amount of R&D tax relief that you can claim depends on the size of your business and the level of expenditure. Contact your local Perrys branch to discuss R&D.
How do I claim R&D tax relief?
- You can claim R&D tax relief by submitting a claim to HM Revenue and Customs (HMRC). Here at Perrys, we can help you with this.
What are the deadlines for claiming R&D tax relief?
- You must submit your claim for R&D tax relief within two years from the end of the accounting period. Also, if you’re claiming R&D for the first time and your accounting period commences on or after 1 April 2023, a Claim Notification must be submitted.
