What is R&D tax relief?
R&D is a Corporation Tax (CT) relief that may reduce your company’s tax bill if your company is liable for CT or, in some circumstances, you may receive a payable tax credit via a direct payment into your bank account.
This relief supports companies that work on innovative projects in science and technology. It can be claimed by a range of companies that seek to research or develop an advance in their field. It can even be claimed on unsuccessful projects. The level of relief available depends upon which scheme the company uses.
The SME scheme
From 1 April 2015, the relief a company can get has increased to 230% on their qualifying R&D costs. Loss-making and businesses that breakeven may be qualify for a payable tax credit of up to 33% of their qualifying R&D costs!
To qualify as a SME you will have a staff headcount of under 500 and either a turnover less than €100 million or balance sheet total less than €86 million (your total assets minus total liabilities).
Research and Development Expenditure Credit (RDEC) scheme
From 1 April 2015 a taxable credit is available at 11% of qualifying R&D expenditure. For loss making companies the tax credit is fully payable (subject to certain restrictions set by HMRC).
Companies with no CT liability will benefit from RDEC either through a cash payment or a reduction of tax or other duties due. The payable credit is limited to the company’s PAYE/NIC liabilities of the staff engaged in qualifying activities in the accounting period.
SMEs will be able to claim RDEC if they do subcontracted or subsidised research. Companies in groups are also able to surrender the RDEC against another group company’s CT liability.