R&D Tax Relief for SME’s

The research and development (R&D) tax credit scheme for SMEs offers a benefit of up to 33% on qualifying R&D expenditure. You are classed as a small or medium sized enterprise (SME), for the purposes of R&D tax incentives, if you employ less than 500 employees and have either an annual turnover under €100 million or a balance sheet under €86 million.

SME R&D tax credits offer an enhanced deduction for your R&D expenditure. Typical eligible R&D costs include staff and subcontractor costs, materials and consumables including heat, light and power as well as some types of software.

Your R&D costs will qualify if you try and overcome scientific or technological uncertainties, through creating new or significantly enhanced products, services, software or processes. You can also count R&D where you copy and improve a competitor’s product. However detailed information concerning your R&D cannot already be publicly available or deducible by a competent professional in the field.

If your company has been undertaking qualifying R&D and has not yet claimed R&D relief, you may make a claim for a tax return period that has already been filed with HMRC, as long as it is within two years after the end of the accounting period.

The exact rate of relief you receive will depend on your Corporation Tax position, and whether you are profit- or loss-making.

R&D tax credit rates for a profitable SME

Your R&D expenditure already typically attracts tax relief as part of the normal operational costs of your trade. Your R&D tax credit claim then allows a further 130% of this eligible R&D expenditure to be deducted when calculating the profits of your company’s trade.

R&D tax credit rates for a loss-making SME

The SME R&D tax credit scheme also allows loss-making companies to claim a payable credit. A loss-making company with an R&D spend of £50,000 could claim up to £16,675 as a tax credit.

For more information, or to discuss whether your business may be eligible for R&D tax relief, call us on 01480 596636.