Research and Development (R&D) Tax Relief allows SMEs carrying out R&D related activities to reduce their corporation tax bill, or receive a payable cash credit.
The scheme was introduced in 2000 for small and medium enterprises (SMEs) to encourage investment in innovation by UK companies. So far over 100,000 claims had been made and more than £9.5 billion in tax relief claimed.
225% Tax Relief
SMEs – broadly those with an annual turnover of less than €100m – can reduce their corporation tax bill by up to 225%, e.g. an additional £125 deduction on top of £100 spent of qualifying R&D expenditure.
Tax Refund for Loss Making SMEs
Loss making SMEs can choose to surrender their loss and receive tax relief by way of credits – a cash sum paid by HMRC of up to £32.63 for every £100 spent on qualifying R&D expenditure.
What Qualifies for R&D
Technically, your company or organisation can only claim R&D tax relief the R&D project seeks to achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty – and not simply an advance in its own state of knowledge or capability.
However, eligibility extends far beyond laboratories and science-based research centres.
R&D tax relief can be claimed by virtually every business in every industry that is undertaking some form of software development, innovation, scientific or technological advancement, including restaurants, breweries and creative agencies and tech start-up’s.