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R&D Tax Relief

R&D Tax Relief

Research and Development (R&D) tax reliefs are designed to support companies that work on innovative projects. This encourages greater R&D spending, leading in turn to greater investment in innovation.

They can be claimed by a range of companies that seek to research or develop an advance in their field, this applies to both successful and unsuccessful projects. R&D tax reliefs work by reducing a company’s tax bill by an amount equal to a percentage of the company’s qualifying R&D expenditure.

Types of R&D Tax Relief

Different types of R&D relief are available depending on the size of your company, and whether the project has been subcontracted to your organisation.

Small and Medium Enterprises (SME) R&D Relief

  • Less than 500 staff
  • a turnover of under 100 million pounds or a balance sheet total under 86 million pounds

SME R&D relief allows organisations to claim a tax credit if the company is making a loss worth up to 14.5% of the surrenderable loss

R&D Expenditure Credit

Large companies can claim Research and Development Expenditure Credit (RDEC) for working on R&D Projects. Companies (including SMEs) can claim RDEC if subcontracted by a large company.

The RDEC is a tax credit that is 13% of your R&D expenditure.

Eligibility to Claim

To qualify for R&D tax relief, you must prove that your business has entered into a project to make an advance in science or technology that relates to your company’s line of work.

To qualify, you need to prove that your project:

Looked for an advance in science and technology (and not just for your business benefit)

The project must aim to create an advance in the overall field and not just your business. This means that an advance cannot be an existing technology that has been introduced into your sector for the first time.

Tried to overcome this uncertainty

You need to show evidence that the R&D needed research, testing, and analysis to develop it. You need to be able to explain the work you did to overcome the uncertainty.

Had to overcome uncertainty

This means that there is no existing evidence that something is technologically possible or how it can be done before you start your project.

Could not be easily worked out by a professional in the field

To prove that it could not easily be worked out, you can show other attempts to find a solution have failed.

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