What is R&D tax relief?
R&D is a Corporation Tax (CT) relief that rewards innovation through tax deductions, or in some circumstances, a cash refund.
The relief supports companies that work to ‘resolve scientific or technological uncertainties’. This is a broad definition that encompasses a range of innovative activities and can even be claimed on unsuccessful projects. The level of relief available depends upon which scheme the company uses.
The currently R&D Tax Claim landscape have multiple schemes available depending on the type company and time periods of the claim. The below are the more common claims types and benefits.
For some Accounting Periods starting before the 1st April 2024, the below schemes are available.
| SME | Large company | |
| Size | Not more than £100m turnover or £86m gross assets and fewer than 500 staff. Most companies fall into this category. | 500 staff or more and either more than €100 million turnover or €86 million gross assets. |
| Scheme name | R&D tax relief for SMEs | Research and Development expenditure credits (“RDEC”) |
| Claim value | The R&D credit increases tax deductions to 186% on eligible costs. Loss making companies can claim a cash payment. If you spent £50,000, you could get back up to £9,300. There is potential to get a higher benefit if you are R&D Intensive. |
The RDEC scheme credit is 20% of qualifying costs. The credit is taxable, thereby creating a cash benefit of 16.20% (can offset a tax liability or generate a cash repayment). If they spent £50,000, the benefit would be £8,100. |
The R&D Intensive Rate is for loss making SMEs for expenditure on or after 1st April 2023 but before periods starting on or after 1st April 2024.
For periods starting on or after 1st April 2024, the reform has the below two schemes.
| Profit making entities | Small loss making entities | |
| Size | There are no size limits with the scheme. | Not more than €100m turnover or €86m gross assets and fewer than 500 staff. Must be loss making prior to making a claim. At least 30% of costs relate to R&D. |
| Scheme Name | Merged Scheme | Enhanced R&D Intensive Support ("ERIS") |
| Claim Value | Receive a Taxable Credit of 20% of qualifying costs. The credit produces a benefit of 16.20% which can be via offsetting tax liabilities or cash payout. If you spent £50,000, the benefit would be £8,100. |
Get additional tax deductions of 86% of qualifying costs. Losses can then be surrendered for cash at a rate of 14.5%. f you spent £50,000, they could get back up to £13,485. |