46% Tax relief for R&D expenditure

The tax relief

A company incurring qualifying R&D expenditure under the SME scheme can now claim a deduction against profits equal to 230% of the R&D costs incurred.

That means for every £10,000 of qualifying R&D spend your company could get tax relief worth £4600 (whilst the current Corporation Tax rate is 20%, and the standard relief would be just £2000).

Alternatively, an SME with a trading loss that has incurred qualifying R&D can surrender all or part of that loss in exchange for a repayable tax credit. The amount that can be surrendered is the lower of:

  1.  the unrelieved trading loss, and
  2.  the enhanced qualifying R&D expenditure (230% of the qualifying expenditure)

The amount of credit given is the 14.5% of the loss surrendered.

Qualifying R&D activities

The definition of R&D is a lot more inclusive than many people think. Most critically, it is not just restricted to pure scientific research, it includes the development of new products and processes.

Research and development both qualify.

Any business which uses science or technology to improve a product, or a process, or a material, or a service, in any way, could claim. For example, all of the following activities could qualify:

– reducing energy usage in a manufacturing process

– developing a component that is more efficient

– developing new technology to improve  production methods

A project will certainly contain qualifying R&D activities if it seeks to:

  1.  Extend overall knowledge or capability in a field of science or technology
  2.  create a process, material, device, product or service which incorporates or represents an increase in overall knowledge or capability in a field of science or technology
  3.  make an appreciable improvement to an existing process, material, device, product or service through scientific or technological changes
  4.  use science or technology to duplicate the effect of an existing process, material, device, product or service in a new or appreciably improved way (eg a product which has exactly the same performance characteristics as existing models, but is built in a fundamentally different manner)

Finally, it is important to note that R&D activity expenditure is eligible for enhanced tax deduction rates regardless of whether or not the project is ultimately successful in its aims.

Our advice & fees

Call us now to find out more on 0114 2664432 or email [email protected] with your enquiry.

Your initial meeting is free of charge and the fees we charge for R&D claims if you instruct us are conditional upon the success of the claim. If we don’t help your company save tax there is nothing to pay.

We can also advise you on Patent Box claims.