R&D Tax Credits

UK R&D tax credits are incentives provided by the government to encourage companies to invest in innovation. They allow businesses to claim relief on Corporation Tax for expenses related to research and development activities.

Who can claim?

• Large Companies: Can claim under the Research and Development Expenditure Credit (RDEC) scheme.
• Small and Medium-Sized Enterprises (SMEs): Defined as companies with less than 500 staff and either a turnover under €100 million or a balance sheet total under €86 million. These companies can claim a higher rate of relief.

Benefits

• SMEs can deduct an extra 86% of qualifying R&D expenditure from their taxable profits, making a total deduction of 186%.
• SMEs can claim payable tax credits if they make a loss, worth up to 14.5% of the “surrenderable” loss if they meet the intensity condition (at least 40% of total expenditure must be R&D-related).

Qualifying Activities

To be eligible, projects must seek to make advancements in science or technology. This excludes areas such as arts, humanities, and social sciences. Projects must aim to resolve scientific or technological uncertainties.

Qualifying Costs

• Staff costs directly involved in R&D
• Consumables used in the R&D process
• Software and data costs
• Externally provided worker
• Certain subcontractor costs